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Disaster retirement distributions spread over 3 years...help please!

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Level 15
Level 15

Ive never had one of these.  Im not sure I understand how it works.

Ive got a new client for 2019, in 2018 she took a $30,000 distribution from her 401k as a qualified disaster distribution.

In her 2018 tax return I see a 1099R worksheet (HRBlock) for the 30k, with a taxable amount of 10k, coded L1

I also see the 8915B that shows that 10k taxable amount.

She didnt have any 1099R for 2019, but it looks like shes supposed to be paying tax on 10k a year for 3 years, is that how this works?   

How does it get entered in 2019?


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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9 Replies 9
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Level 15

"it looks like shes supposed to be paying tax on 10k a year for 3 years, is that how this works? "  Yes

I can't help you with ProSeries. There must be a worksheet somewhere.


ex-AllStar
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Level 11
Level 11

Hi  @Just-Lisa-Now- In ProSeries on the 1099 worksheet, scroll down, and there is a smart worksheet for a disaster distribution

Here is link, https://www.irs.gov/retirement-plans/disaster-relief-bill-includes-retirement-plan-distribution-and-...

Participants taking a qualified disaster distribution can include it in income in equal amounts over three years, beginning with the year that includes the distribution date. Participants may also repay qualified disaster distributions within three years of receiving a distribution by making one or more contributions to an eligible retirement plan. Any repayment is treated as a trustee-to-trustee transfer.

A qualified disaster distribution is an amount up to $100,000 taken by a participant whose main home was in the federally declared disaster area and the distribution was made for:

  • Harvey, after August 22, 2017, and before January 1, 2019;
  • Irma, after September 3, 2017, and before January 1, 2019;
  • Maria, after September 15, 2017, and before January 1, 2019;
  • The 2016 disasters, in either 2016 or 2017; and
  • California wildfires, after October 7, 2017, and before January 1, 2019.
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Level 15
Level 15

On the 1099R worksheet?    I saw that QDD area, but she doesn't have a 1099R for 2019, so i didnt understand how that would work.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 15
Level 15

I think I need to fill out an 8915C but I'm struggling to fill it out....no thats not it either, that says for 2018 distributions received in 2019.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 15
Level 15

Ahh, ok, I think I found it....I need to use another 8915B and plug in the taxable figure, it inputs it on Line 4b of the 1040.

 


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 12

Your client has $10k taxable, which means splitting $10k into 2018, 2019 and 2020 as the additional taxable income from the distribution in 2018. Did the prior tax preparer put it all in 2018?

 

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"Level Up" is a gaming function, not a real life function.
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Level 15
Level 15

I think HRB may have goofed on that 2018 1099R taxable amount box, it was probably left empty/blank and they filled in the 10K (I dont have the actual 2018 1099R to look at)...it supposed to be 30K (she got a check for 30k) spread out over 3 years , 10K each (this is what the TP is expecting).


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 15
Level 15
The 8915B for 2018 shows the 30K and the 10K taxable

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 12

"The 8915B for 2018 shows the 30K and the 10K taxable"

That would make it a 2017 Disaster, then. B = 2017.

"Use 2019 Form 8915-B if you were adversely affected by a 2017 disaster listed in What 2017 Disasters Are Covered, later, and you received a distribution that qualifies for favorable tax treatment. For distributions for qualified 2016 disasters, see Form 8915-A and its instructions."

"File 2019 Form 8915-B if either of the following applies.
• You received a qualified 2017 disaster distribution in 2017 or 2018 that you are including in income in equal amounts over 3 years.
• You made a repayment of a qualified 2017 disaster distribution in 2019."

That form suffix (the A or B or C or now we expect an E; whatever) is driven by the Year of the Disaster, not the tax year. The Disaster is declared and the qualifying dates and the dates of distribution that apply (for instance, whether or not it is allowed to have a distribution for a Disaster event in one year that will overlap year end) and repayment timeliness is listed in the instructions for the form. The distribution is for that disaster, but it could be a distribution for the same year as the disaster or the year after it and it has to meet the instruction requirements, of course, and it would be for purposes of recovery and repair. You didn't note which disaster it was for or compared to the Date for that Disaster. Go here:

https://apps.irs.gov/app/picklist/list/priorFormPublication.html?value=8915&criteria=formNumber&subm...

To see how there is a -B revision for each tax year that would apply (2017, 2018, 2019) for the three-years of allowed deferral/repayment window for 2017 Disasters.

You can get the IRS transcript for 1099-R for 2018, to see how the brokerage reported it.

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"Level Up" is a gaming function, not a real life function.