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Pension withdrawls made in 2021

rcooley25
Level 11

I need some education on this subject. Do people who mad withdrawls from their pension plans during 2021 get to spread it out over 3 years or is this just for 2020? I thougjt it was just for 2020 but I amd not 100oercent sure,

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9 Comments 9
Just-Lisa-Now-
Level 15
Level 15
II think the Covid disaster distributions ended 12/31/20. Other disasters in 2021 may still allow disaster distributions to be spread over 3 years.

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hankinstax
Level 5

Covid disaster distributions in 2019, were taxed at 1/3 in 2019 with 1/3 taxable in each of years 2020 and

2021.  

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sjrcpa
Level 15

While I know it has been a long time, COVID didn't start in the US until 2020.

The more I know, the more I don't know.
joshuabarksatlcs
Level 10

RE: While I know it has been a long time, COVID didn't start in the US until 2020.

Technically, some international political activists claimed COVID started in the US before 2020, way before the blowup in Wuhan (which was closed off in late January, 2020).  I didn't say me.  I said some international political activists.  Also, that's besides the point of the issue here.

Back to the issue, here's a crash course: (remember the tax payer has to be a qualified individual as defined in the Code.

Q4. What is a coronavirus-related distribution? 

A4. A coronavirus-related distribution is a distribution that is made from an eligible retirement plan to a qualified individual from January 1, 2020, to December 30, 2020, up to an aggregate limit of $100,000 from all plans and IRAs.

Q13. How do qualified individuals report coronavirus-related distributions?

A13. If you are a qualified individual, you may designate any eligible distribution as a coronavirus-related distribution as long as the total amount that you designate as coronavirus-related distributions is not more than $100,000. As noted earlier, a qualified individual may treat a distribution that meets the requirements to be a coronavirus-related distribution as such a distribution, regardless of whether the eligible retirement plan treats the distribution as a coronavirus-related distribution. A coronavirus-related distribution should be reported on your individual federal income tax return for 2020. You must include the taxable portion of the distribution in income ratably over the 3-year period – 2020, 2021, and 2022 – unless you elect to include the entire amount in income in 2020. Whether or not you are required to file a federal income tax return, you would use Form 8915-E (which is expected to be available before the end of 2020) to report any repayment of a coronavirus-related distribution and to determine the amount of any coronavirus-related distribution includible in income for a year. See generally section 4 of Notice 2005-92.


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Just-Lisa-Now-
Level 15
Level 15
funny they ended it 12/30/20 not 12/31/20 . Did someone forget how many days Dec has?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
rcooley25
Level 11

I dont am to offend but I would reccomend that you look at your calendar.

Thirty days have September april , june and november.

All the rest have thiry one exceot  feb.

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qbteachmt
Level 15

This is asked in another topic:

"Although the initial provision for penalty-free 401k withdrawals expired at the end of 2020, the Consolidated Appropriations Act, 2021 provided a similar withdrawal exemption, allowing eligible individuals to take a qualified disaster distribution of up to $100,000 without being subject to the 10% penalty that would normally apply. This extended the timeline for penalty-free distributions through June 25, 2021."

There have always been provisions for disaster withdrawals. What there is for 2020 only is "covid" disaster.

https://hbkcpa.com/caa-suspends-early-distributions-retirement-plans/

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joshuabarksatlcs
Level 10

There have always been provisions for disaster withdrawals. What there is for 2020 only is "covid" disaster.

The internal revenue code makes a thick book.  Agreed.  The Asker asked about distributions that are taxed over 3 years. 


I come here for kudos and IRonMaN's jokes.
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qbteachmt
Level 15

"The Asker asked about distributions that are taxed over 3 years."

That part isn't new. For example, tax year 2019 or 2020 and Disasters of 2019 (pre-covid):


"Who Must File

File 2020 Form 8915-D if any of the following applies.

  • You received a qualified 2019 disaster distribution from an eligible retirement plan.

  • You received a qualified 2019 disaster distribution in 2019 that you are including in income in equal amounts over 3 years."

The limit up to $100,000 wasn't new, either. Neither was the waiver of the penalty as early withdrawal. And CARES vs CAA is this discussion. I gave a link to a nice article that explains the CAA impact on this.

 

(edited to cover limits, penalty and taxable spread)

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