Any distributions you have taken within the 2020 tax year will be taxable on your federal return. This will include Coronavirus Related Distributions as taxable income.
However, the IRS has released guidelines on a favorable tax treatment for these distributions. This tax-deferral treatment is to be reported on Form 8915-E.
Please remember, that this is specifically referring to the distribution amount counting towards your taxable income. This does not include the 10% penalty for early withdrawals.
What is Form 8915-E?
IRS Form 8915-E, Qualified Disaster Retirement Plan Distributions and Repayments, will be used to report coronavirus-related distributions.
This election will allow you to claim qualified retirement distributions over the span of 3 years, as opposed to reporting it all within the tax year you received the distribution.
You will also need to report any repayments to these accounts made within the repayment deadline on this form, as well.
For more information on this form, please review our article on Form 8915-E, here.
What about the additional 10% tax on Early Distributions?
Your disaster distribution amount will be considered taxable. However, any additional 10% tax generally assessed on an early disaster distribution, may be exempt. To learn more on claiming an exemption to the 10% additional tax, please review our article on the 10% Early Withdrawal Penalty Exception.
Where do I enter this in my account?
- Federal Section
- 1099-R, RRB-1099, RRB-1099-R, SSA-1099
- Add or Edit a 1099-R
- Enter your 1099-R information
- Choose Retirement Plan
Based on the code in Box 7 of your distribution, you will be asked if the distribution was due to a qualified disaster. Selecting Yes will allow you to enter the amount of the distribution and any repayments made.
Please Note: The taxable amount will be removed from the 1099-R and placed on the 8915-E per IRS guidelines.