TAX

[hofinancial]

Customer took $20000.00 from her 401k. How to enter information so customer will receive tax deduction

[Just-Lisa-Now- · Accepted solution]

So they took a Covid distribution?   You mark the Covid boxes on the 1099R worksheet.  That will take away the penalty and spread the taxability out over 3 years.

Its not really a "tax deduction" for this though, do you understand what's really happening with this?   Be sure you explain to the client that they'll have additional income the next 2 years following so you may have to do some tax planning for this.

[qbteachmt]

You mention "tax deduction" but there is not one with this type of activity, typically.

You should use the 1099-R; here is the Help article for you to read, follow which scenario applies. Also, check Eligibility for the exclusion. And lastly, you need to know if this person has Basis.

Your question seems a bit too vague to confirm you checked all of those details. The article will be helpful.

https://proconnect.intuit.com/community/individual/help/proseries-form-1099-r-faq-s/00/4853

[ljr]

Also you need to explain that only $100K of the $200K can be a covid distribution and if taxes were withheld it will only go against current 2020 return and they will have  balances due for 2021 and 2022? Oh did you ask if they had covid with a cdc approved testor household member or that they suffered an adverse financial effect? I had clients with neither and actually made more money than last year without the covid distribution and used money to buy a vacation home. SO not COVID related - SO fully taxable this year.