COVID-19 Relief on early -K early distribution penalty

[Mustapha Ratib]

Hello All,

Individual who is years old who is affected by COVID-19 can he withdraw full Amount of his  retirement accounts 401(k) for loosing his job without a 10% penalty, and if so do we use form 5329 and what linbe if so.

I did find online that the 10% penalty will be waived for distributions made in % 2020 if it is covid-19 related.

Thank you for your response.

Mustapha

[sjrcpa]

It was for 2020, up to $100,000.

[Just-Lisa-Now-]

You may want to brush up on your CEs as to how this all works.

Form 8915E does the penalty waiver and 3 year spread of taxability (or to opt out of the 3 years spread)

There was a 100k limit for distributions.

[qbteachmt]

You need to read the regular provisions.

For instance, 55 and lost a job; substantially equal periodic payments; rollover options.

[Mustapha Ratib]

Thanks Lisa for your response, but unfortunately, could NOT find the Form 8915-E, although I do see 8915-A,B,C,and D all Disaster retirement plans distribution.

I know than under CARES Act early withdrawls due to COVID / Hardship will noe be subject to 10% I just don't know how to apply it into Proseries. all I can think of is the 5923 which is for other scenarios.

Regards

Mustapha

[qbteachmt · Accepted solution]

Did you enter the 1099-R, and mark that this is qualified as covid distribution?

[Mustapha Ratib]

That's what it is, Form 1909-R Worksheet Line 19-1 Qualified Distribution Smart Worksheet

A- 2020 CoronaVirus related distribution: X

B- Amount of Qualified Disaster Distribution: Entire Distribution is qualified (which is the total amount of 1099-R form): X

Do you agree?

[Mustapha Ratib]

When I applied that entry I got the following outcome:

Total Distribution is $ 40,163 and the taxable Amount calculated in line 5b is $13,388.

[qbteachmt]

How long since you updated your program? The 8915-E was complete last month.

Here: https://proconnect.intuit.com/community/retirement-tax-credits-and-deductions/help/generating-form-8...

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/8915-e/00/126170

[Mustapha Ratib]

Thank you very I totally forgot about that entry. I did respond to the outcome of the entry, hope you saw.

Thanks

Mo

[qbteachmt]

"Total Distribution is $ 40,163 and the taxable Amount calculated in line 5b is $13,388"

Yes, that is One Third this year. That's the point of the option on the 8915-E. All in this year, or spread over this year + two more = 3 years for disaster.

[Mustapha Ratib]

Thank you very much, that was very helpful, I did not know that the form in generated based on the 1099-R entry distribution Coronavirus related.

Thanks again.

Mo

[qbteachmt]

"I did not know that the form in generated based on the 1099-R entry distribution Coronavirus related."

Review it to confirm what the taxpayer wants for their option.

[Mustapha Ratib]

spread it on three years looks better idea because in some cases it creates an EIC for the taxpayer which may benefit from over three years, instead of getting taxed all at once.

Mo

[qbteachmt]

The new rule for unemployment income partial exemption changes things from last week, too. It affects most anything subject to income limitation.