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1099-R

Masbim
Level 1

If a tax payer got money out of a retirement plan on a 1099-R due to COVID 19 pandemic can they be exempt from paying taxes, I check the boxes on the Qualified Disaster Distribution Smart Worksheet and it makes a HUGE decrese. Just want to be sure

Thanks 

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2 Replies 2
Cpabandit
Level 1

I believe they have to have been infected with Covid they avoid the 10% penalty if they are younger than 59 1/2. But they always have to pay the tax.

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qbteachmt
Level 15

You have two different things mixed together.

"can they be exempt from paying taxes,"

No. But, if that is a Qualifying disaster distribution, there are provisions that include spreading the taxable amount over three years for income tax purposes. Optionally, on Form 8915-E, you can report all of it in the 2020 tax year and pay income taxes on it.

"I check the boxes on the Qualified Disaster Distribution Smart Worksheet and it makes a HUGE decrese"

If that is the Qualified Distribution box, you just waived the Penalty, which is 10% of the distribution, which would still apply if this is not a qualified distribution.

As the tax preparer, you need to read and learn what applies:

https://www.irs.gov/newsroom/coronavirus-relief-for-retirement-plans-and-iras

https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

 

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