can you pay tax on a retirement withdrawal over a 3 year period if you are not repaying the withdrawal

[Just-Lisa-Now-]

yes, the majority of people will not be paying it back

[qbteachmt]

Yes, if it Qualifies. You have to read the Form 8915-E instructions.

[momma1]

Thank you, Can you tell me how to report when 1099R shows full distribution in the amount of $273,487.00 with federal tax withheld of $34,697.00.  The client is 61 years old and has retired from their job in the same year.  Their return is showing a tax due of over $17,000.00 due.  How do I reduce this tax over 3 years?

[momma1]

This withdrawal was not take as a disaster withdrawal.  The return has already been electronic filed and the taxpayer wants to know how to claim tax due over three years.  I am not sure it can be done due to the fact that the withdrawal was for over $200.000.00 and tax of $34,000 was shown withheld on the 1099R.

Part of the tax due comes from Social Security being taxable along with W2 income.  A higher tax bracket makes there tax due of over $17,000.00. 

Just need to verify what  I am thinking is correct. I am thinking the only alternative is to due a request for installment payments.

[JJD753]

You better make sure it qualifies as a covid distribution. If it does then only the first $100k would be allowed the three year spread.

[sjrcpa]

The spreading tax over 3 years applies to COVID related distributions. And it was to be done as part of the 1040 using Form 8915-E.

[JJD753]

Sorry, sent my response before I read your last post. Installment agreement is certainly an option. They can also pay by cc through a 3rd party. You can get that info on irs.gov, make a payment.

[qbteachmt]

"I am thinking the only alternative is to due a request for installment payments."

Now you are Mixing Up provisions.

The disaster distribution provision is why you would have three years to Repay the distribution, or to spread the tax hit on the Distribution Amount over three years. Not the entire amount a taxpayer owes to the IRS due to their 1040.

Installment agreements are a type of Settlement negotiation for people who are Broke and cannot pay their tax debt.

You likely could amend the return to show the max of $100,000 as disaster distribution and the remainder is a Partial regular taxable Distribution.

"The return has already been electronic filed and the taxpayer wants to know how to claim tax due over three years."

Well, that horse left the burning barn already and is in the next County!

"I am not sure it can be done due to the fact that the withdrawal was for over $200.000.00 and tax of $34,000 was shown withheld on the 1099R."

The Withholding is already paid in, and is not Refundable. It also isn't Tax Owed on the distribution. It's a forced prepayment.

Are you going to amend their return, then?

Make sure they understand the difference between Tax Balance Owed, and Tax on the $100,000 portion of a Disaster Distribution. You are mixing up provisions that you need to understand to guide your client.

[qbteachmt]

Oh, here is how the Three Years is seen on the worksheet:

The Amount is split into thirds, so only that one-third is part of the year's Taxable Income.

For a $273,000 distribution, he would have $173,000 taxable gross + 1/3 of the $100,000 disaster distribution portion, or $306,000 taxable additional gross income. Next year, he has the additional $33,333. The final year, he has the final third, the $33,333 added to Gross taxable income.