Client thought he was rolling over his IRA to another IRA but the receiving account was not an IRA. 1099R has no withholding ($50,000 ish) and is a code 7. Under the Cares act can he put it back into his IRA at this late date?
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This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content. -
That expired last August. He can take it into income over three years if he was effected by Covid. -
If it's a Qualified 2020 Disaster Distribution then he does have 3 years to repay this. See instructions to Form 8915-E.
The qualifications start on page 4 of Notice 2020-50.
RickComment
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Yup, that's what I did, 3 years. Client happy.......Originally posted by rbynaker View PostThis post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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But if it is Covid-19 qualified disaster distribution under 2020 coronavirus related IRA distribution he can repay up to 100,000 before 4/15/2021 or before he file his 2020 tax return , is that correct?Comment
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Yes. In fact, he can repay over three years. Depending on his repayment dates, you could have one or more years to amend. As long as he puts back at least 1/3 before each year's deadline, he won't pay any tax and not pay the 10% either. Check out the 8915-E instructions and explain the options to your client -- if he qualifies as affected by Covid.Comment
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But he already repaid 100,000 back to his IRA account. What's the next steps to correct the situation?Comment
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And he had covid in 2020.Comment
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Form 8915-EComment
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10/14/20 he took our 100,000 out of his IRA. 03/15/21 before file his tax return he pay back 100,000 to his IRA account.
Form 8915-E, Ln 17, I entered 100,000
Ln 18, I entered 100,000
LN 19, shows 0
1040, LN 4a shows 100,000
LN 4b shows 0
anything wrong here. He did not have to report 100,000 on this year's tax return. Would software automatically add 100,000 on her tax return next year, then I have to do amended return in 2021 tax return to get refund backComment
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If he repaid the full amount, none of it is taxable. Not following why you think the software would add it back next year and why an amended return would be required."Taxation is the price we pay for failing to build a civilized society." ~ Mark SkousenComment
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Unless 4a is >$100,000, then I think 4b will equal 4a.
If he pays back all $100,000 before filing his 2020 return, then he will not take $33,333 or $100,000 into income on his 2020 return or have the 10% penalty. If you checked the boxes at line 9 and 17, then I think you're done.
If he paid back less than the full amount, then your software will carry to 2021 and you deal with any more that he pays back in 2021 prior to filing his tax return.
Only if he paid back less than $33,333 before filing 2020 and then more than $66,666 cumulative in 2021 or all $100,000 at once in 2022 (in other words, less than 1/3 in early years and catching up by year 3) would you need to amend 2020 (and perhaps 2021) in a later year. Only if he paid tax on part of his distribution in year 1 &/or year 2 but repaid the full amount by year 3 would you need to amend.
If he pays back his entire distribution before filing his tax return this year, he's done. No extra income. No extra tax. No 10% penalty.Last edited by Lion; 03-30-2021, 12:26 PM.Comment
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Great info............ Thanks Lion!This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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Thanks Lion. So he is clear with IRS for 2020 tax return. Would he receive any 1099-R for tax year 2021? Becausse he repaid in 2021 before filing his files his tax return. i.e. How can he prove to IRS that he repaid the whole amoungt.
Sorry, it seems I am going on and on with this issue. But I am just worried if I made a mistake, then the penalty will be huge. I read 8915-E again and again. Not 100% certain i did it right.Comment
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He isn't taking any 2021 distribution? Then he won't receive a 2021 Form 1099-R.
He can save all his documents from replacing the $100,000 -- such as his monthly statement showing it went back in, a dated deposit receipt, anything he has from the brokerage where he returned the funds. Form 5498 will give the IRS the brokerage's side of the story, the brokerage reporting that they received the funds. Forms 5498 come out in May, usually, but might be extended to June due to the 17 May deadline for people to make contributions this year.Comment
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