Can 2020 return be amended to include 8915-E that was not included with original return?

[toddcbad]

Taxpayer took a distribution from a 403b plan in 2020 and intends to repay it to the plan within the three-year window for qualified disaster distribution repayments. Thinking that this was a loan, he didn't think that he needed to report it and the income was not included on his 2020 tax return nor was a Form 8915-E included.

Taxpayer received a notice from the IRS looking to add the distribution to income. Taxpayer intends to use the three-year income inclusion option, so he is not trying to opt out which would have required a timely filing of this election.

Does an original 8915-E form have to be timely filed or can it be originally filed with an amended return?

[qbteachmt]

"Taxpayer intends to use the three-year income inclusion option"

That's the default, not the elective option. The election cannot be used, now.

If there was a 1099-R, it's not a loan. You would have noticed if there was a 1099-R, though.

[toddcbad]

I stated that he is using the three year option to be clear that we understood that a late election for a one year option is not desired and is not allowed by the code.

Yes, I am aware that there is a 1099-R that the client did not include on their tax returns.

Still looking for an answer to the question.

[qbteachmt]

It's not an option to go with the three-years; it's the default. Yes, you need to amend 2020, if there was a 1099-R that was overlooked.

[TaxGuyBill · Accepted solution]

Yes, you can amend to file 8915-E to avoid the 10% penalty and to allow the repayment within 3 years.

However, be aware that if the taxpayer repays the amount, you may need to amend it AGAIN to remove the 1/3 of the 1099-R.

[qbteachmt]

"you may need to amend it AGAIN to remove the 1/3 of the 1099-R."

That's a good point. Since the distribution was in 2020, we are half-way into that third year right now. I would find out when he intends to make any payment and for how much, to take that into consideration for the amendment you would be preparing now.

[toddcbad]

Further question: How do you actually amend a 2020 return to show the repayment?

Taxpayer repaid the entire amount in 2022. Since the distribution was spread over three years, there would not be anything included in the 2022 return but need to carry back the excess repayment to 2021 and 2022. This is the amended return for 2020 and 2021.

But, what part do you actually amend?

81915E has line 10 but its for repayment before the due date of the return and specifically states not to include repayments made later than the due date.

So, where do you put the repayments made after the due date of the return when amending?

[qbteachmt]

From the instructions:

"If you make a repayment in 2021 after you file your 2020 return, the repayment will reduce the amount of your qualified 2020 disaster distributions included in income on your 2021 return if you have spread the income over 3 years, unless you are eligible to amend your 2020 return."

I thought we were catching this before you filed the 20211 return?

Read the part of Amending the 8915-E. Of course, they likely meant you use the 8915-F for your 2021 return, marking that this is a 2020 Disaster. You only use 8915-E if you are filing a 2020 tax return or amending it.

[toddcbad]

2021 was filed without the 1/3 distribution as well. It will also need to be amended.

Need to amend 2020 and 2021.

Need to amend 2020 to claim that it was a disaster distribution. Also need to amend 2020 to show that it was repaid - perhaps in the same amendment. The first step will add Form 8915-E to the return  to avoid the 10% and to spread the income over 2020, 2021, and 2022.

My problem is that I also want to amend 2020 to show that it was repaid and thus back out the 2020 income that is 1/3 of the distribution. I just don't know what exactly to amend to show this. The money was put back in which is essentially a rollover but I can't find anything that says to make it look like a rollover on the amended return.

So I need to:

Amend 2020 to show disaster relief distribution of 1/3 and no penalty.

Amend 2020 to show repayment and back out the 1/3 relief distribution.

Amend 2021 to show income for 1/3 of the 2020 distribution.

Amend 2021 to show repayment and back out the 1/3 relief distribution.

Don't mess up 2022 when it comes time to file it. This one should be straight forward since the payback has happened before the 2022 filing deadline.

Again, I am just trying to figure out what to amend on the 2020 return to back out 1/3 of the distribution since it was repaid in 2022. Perhaps it is to show it as an indirect rollover but I can't find anything that says that this is the way to do it.

[qbteachmt]

"My problem is that I also want to amend 2020 to show that it was repaid and thus back out the 2020 income that is 1/3 of the distribution."

But that's not what you are doing.

Maybe this will help:

The repayment is treated as falling under the Rollover provisions. There is no 60-day window, no "one every 12 months" limit, etc.

"2021 was filed without the 1/3 distribution as well. It will also need to be amended."

You don't report 1/3 now that all of it was repaid at once. You would not amend 2021 for 1/3, then amend again to remove this due to repayment in full.

Q7. May I repay a coronavirus-related distribution?

A7. In general, yes, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that the distribution was received. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

If, for example, you receive a coronavirus-related distribution in 2020, you choose to include the distribution amount in income over a 3-year period (2020, 2021, and 2022), and you choose to repay the full amount to an eligible retirement plan in 2022, you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022. See sections 4.D, 4.E, and 4.F of Notice 2005-92 for additional examples.

Obviously, your taxpayer cannot claim a refund for taxes never paid.

[toddcbad]

Yes, I get what you are saying: "The repayment is treated as falling under the Rollover provisions. There is no 60-day window, no "one every 12 months" limit, etc."

There is a 2020 1099-R that did not go on the originally filed tax return so taxpayer received an IRS letter.

It needs to be added to the tax return. The distribution had fed/state tax withheld. I assume that I need to indicate that it was coronavirus disaster distribution thereby creating a 8915-E. This creates 2020 taxable income - 1/3 of distribution. This part is fine. I can do this.

From Q7 of the IRS FAQ:

"you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022."

My question is, what part of the return needs to be amended? Change the distribution code on the amended return from a "1" to "G" so that it isn't included in taxable income and the taxpayer can get his withholding back?

[qbteachmt]

There would be no 2020 taxable amount: If this had been done right the first time, then you would be doing the amendment for 2020 due to the later repayment. That means there is no taxable amount afterall. There is no reason to make the amendment to 2020 resulting in taxable amount, then amend it again to meet the provision that it was repaid and there is no tax due. You can skip all of that extra part. Amend and report the 1099-R and that it is a full rollover.

"The distribution had fed/state tax withheld."

Was the Gross Distribution amount, the repaid amount? If so, you treat it as a full rollover: report the 1099-R and the repayment = net is 0. If not, it was not fully repaid. If not fully repaid (the gross), you have to report this as a partial rollover, and you will now have a three-year spread for the taxable amount.

Most times you want to indicate this is a coronavirus distribution to avoid the 10% penalty and to be able to take advantage of the disaster distribution provision(s) including the later repayment option. Your taxpayer took advantage of that repayment provision, so even if there would be no early distribution penalty, you need to indicate it is under the disaster provision.

"Change the distribution code on the amended return from a "1" to "G" so that it isn't included in taxable income and the taxpayer can get his withholding back?"

The distribution code is what the Issuer knows. It is not what the Taxpayer did with the funds. They didn't know if he was using, converting, would be repaying, etc. You don't make that change. You show it per the 1099-R; you show the rollover. No, he won't get back the withholding; you seem to consider withholding as Tax on the distribution. It's not. All withholdings and estimates are prepayments against likely total 1040 tax owed. Once an amount is paid in through withholding or estimates, it is just part of that tax year's payments.

The only way anyone gets anything back is if they paid in (or get credited) more than owed. You already stated the 1099-R was not even on the original filing. If there was a balance owed or a refund due, that ship has passed. Unless you are changing something that changes the bottom line of the 1040, there would be no further action as to refund or balance due. This entire concept and paragraph has nothing to do with the fact that a distribution had withholding. It has to do with the tax picture, not the payment taken by withholding.

[toddcbad]

"Amend and report the 1099-R and that it is a full rollover."

This would be great but without a form 8915-E filed for 2020 declaring that the withdrawal was a disaster withdrawal, the basic facts are that it was an indirect rollover that took two years. Completing 8915-E adds 1/3 to income for 2020.

"If this had been done right the first time, then you would be doing the amendment for 2020 due to the later repayment."

Agreed. But specifically, what would be amended?

If it had been done correctly would you:

Remove form 8915-E and redo the pension payout to show and indirect rollover? This is what I keep asking, what actually gets amended in the return? Mark the return to be amended in Screen 59 in Lacerte and then what? Delete the Form 8915 disaster entries in screen 13 and enter 1/3 of the distribution in the Indirect Rollover entry in screen 13?

"Was the Gross Distribution amount, the repaid amount?"

Yes, $100,000 out in 2020, $100,000 paid back in 2022.

"If so, you treat it as a full rollover: report the 1099-R and the repayment = net is 0."

It is only a valid rollover if it was a disaster rollover since it took two years to pay it back. No timely election was made to have it show up in a single year (2020) therefore the income has to be spread over three years. Payback in 2022 per IRS means no income recognized in 2022, amend 2021 and 2020 to back out the income. There is no option to consider it all handled in 2020 for "the repayment = net is 0.".

"Your taxpayer took advantage of that repayment provision, so even if there would be no early distribution penalty, you need to indicate it is under the disaster provision."

There is only one way that I know if to do this - 2020 Form 8915-E. Are you suggesting another way?

"Unless you are changing something that changes the bottom line of the 1040, there would be no further action as to refund or balance due."

Since there was unreported withholding accompanying the unreported 1099-R, then yes there is a definite change to the bottom line. Full payback of the distribution nets a $10,000 refund.

[qbteachmt]

"but without a form 8915-E filed for 2020"

Here:

https://proconnect.intuit.com/community/form-1099-r/help/how-to-enter-coronavirus-related-retirement...

Of course you will mark that the 1099-R is a qualified disaster distribution; we've covered this part. Why do you now state "without" that form? You are overthinking this.

"But specifically, what would be amended?"

The 1040X is prepared for the reality you need to report. Not for what should have been that also no longer applies.

"It is only a valid rollover if it was a disaster rollover since it took two years to pay it back. No timely election was made to have it show up in a single year (2020) therefore the income has to be spread over three years."

Moot.

"There is only one way that I know if to do this - 2020 Form 8915-E. Are you suggesting another way?"

No, but you seem to be.

"Since there was unreported withholding"

Oh; that's yet another new piece of information. How can someone forget to include they prepaid $10,000; and withholding typically is 20% of the distribution.

Again, you really are completely overthinking all of this. Follow the instructions.

[toddcbad]

Thanks for your time but you continue to ignore a specific question. It's fine if you don't want to answer it but then tell me. From my prior post:

If it had been done correctly would you:

Remove form 8915-E and redo the pension payout to show and indirect rollover? This is what I keep asking, what actually gets amended in the return? Mark the return to be amended in Screen 59 in Lacerte and then what? Delete the Form 8915 disaster entries in screen 13 and enter 1/3 of the distribution in the Indirect Rollover entry in screen 13?

Or, leave the 8915-E in and just enter 1/3 of the distribution as an indirect rollover in screen 13?

[toddcbad]

"Oh; that's yet another new piece of information."

No, in prior post.

[qbteachmt]

"but you continue to ignore a specific question"

No, it's not been ignored. You keep drifting into meaningless territory. We can only respond to what is provided, and this seems to have been a developing storyline.

It seems you started this topic before the 2021 return got filed, and the input was to help avoid redundant amendments.

Now you have a 1099-R that was overlooked, with withholding that also was overlooked. Of course you need to amend 2020, but you will be amending it to report that a covid disaster distribution has also been fully repaid, which is treated as a rollover.

There would be no taxes to refund when a 1099-R had taxable income that was not reported. Now we also learn withholding was not listed on the return. None of this matters now, because you need to Amend 2020 to reflect the reality as you know it now.

You keep trying to recreate history, which is moot now.

I don't know how much more direct this can be. No one is dodging anything.

[toddcbad]

@TaxGuyBill

Perhaps you can provide me with a specific answer that I am looking for.

Assume that an 8915-E was filed for a 2020 tax return showing a disaster withdrawal of $100,000 and nothing was repaid before the 2020 return was filed or any other time in 2020 and nothing was repaid in 2021 either. No election was made to include all of the $100,000 in income in 2020 so $33,333 was included on the 2020 return, $33,333 was included on the 2021 return, and $33,333 is expected to be included on the 2022 return.

Taxpayer pays back the entire $100,000 to the retirement plan in 2022 after the 2021 return was filed.

Per the IRS instructions the $33,333 of income is not included on the 2022 return and $66,666 is available to be carried back to the 2021 and 2020 returns by amending them to remove the income from those returns.

When amending the 2021 return, does the 8915-F get amended by entering $33,333 on Part II Line 14?

If so, where is the entry made in Lacerte? Screen 13.1, Code 1357 where it says, "Repayment made before filing 2021 tax return" or somewhere else? I ask because of the statement "before filing" and this would be an amended return after filing the original 2021 return since the repayment was made in 2022. Perhaps this "before" is applied to the amendment and that this is still applicable because the 2022 payment was before the 2021 amended return? The statement that Lacerte generates for Form 8915-F, Part II Line 14 item 4 states, "Enter and repayments you made before filing your 2021 return."

Using this method does result in an amended return with the expected outcome - the 2021 income is reduced by the $33,333 that was previously included in the return, so it seems logical. So the question is really about the words "before filing your 2021 return."

Similar question for amending the 2020 return. Does the $33,333 carry back repayment amount end up on Part II Line 10? Same question about the use of the word "before" on the line that states, "Enter the total amount of any repayments you made before filing your 2020 tax return. But don’t include repayments made later than the due date (including extensions) for that return.

Or, does the carry back get handled some other way?

[qbteachmt]

You forgot the @ sign.

@TaxGuyBill 

[TaxGuyBill]

The IRS Instructions are rather bad about that point, but yes, enter it on the line where it says "before".

[toddcbad]

Thank you.

[dlagonigro]

Hi

Can you point me to the directions for this and the ones for the form make it seem you can't

[qbteachmt]

@dlagonigro 

You seem to be lost on the internet.

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Thanks.