If you received an IRA distribution due to a natural disaster, it may qualify as a Qualified Disaster Distribution. This article explains what a disaster distribution is, how to determine if you took a disaster distribution, and how to report it using Form 8915-F.
Step-by-Step Instructions:
- Go to the Federal Section of your tax software.
- Navigate to:
Income → 1099-R, RRB, SSA → Add or Edit a 1099-R - Enter the information from your Form 1099-R (Boxes 1, 2, and 7).
- After continuing, you’ll be asked if the distribution is for a qualified disaster retirement plan distribution.
- Select Yes, then click Continue to enter the disaster-specific details.
You must also indicate that you were affected by a natural disaster:
- Go to Basic Information → Personal Information → Additional Personal Information
- Check the box stating the taxpayer or spouse was affected by a natural disaster
- Enter the disaster designation in the box that appears
What’s a Disaster Distribution?
If you're wondering, "What's a disaster distribution?", it refers to a retirement plan distribution made to individuals affected by a federally declared disaster. These distributions may qualify for special tax treatment, such as:
- Spreading the income over three years
- Avoiding the 10% early withdrawal penalty
Examples by Year:
- 2021: Qualified distributions include:
- 2019 Puerto Rico Earthquakes (DR-4473-PR), reported on Form 8915-D
- 2020 disasters, reported on Form 8915-F (2020 disasters)
- 2022: No new qualified disaster distributions for 2020 disasters were allowed. Repayments had to be made by June 26, 2021.
Note: Coronavirus-related distributions are not considered disaster distributions for 2021 or later.
Did I Take a Disaster Distribution?
If you're asking, "Did I take a disaster distribution?" or "How do I know if I took a disaster distribution?", here’s how to check:
- Review your Form 1099-R for any disaster-related codes or notes.
- Check if you filed Form 8915-F in a prior year.
- If you received a distribution due to a federally declared disaster and were informed it qualifies for special tax treatment, it likely qualifies.
Required Forms
You may need to complete the following forms:
- Form 1099-R: Reports the distribution amount.
- Form 8915-F: Used to report and spread the disaster distribution over three years.
- Form 8606: If you have basis in a traditional IRA.
- Form 5329: May be needed to avoid the 10% early withdrawal penalty, depending on the distribution code.
To view the instructions for Form 8915-F, click here.