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Covid-19 100k distribution re-invest reporting on 1040

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For this question, please imaging that it is April 15th and you are about to present the 2020 return to the client for signature.

A married couple made $147K and took a distribution for $99K from her 401k plan.  When they file their 2020 taxes, they elected to pay taxes on the distribution in tax years 2020, 2021, 2022. They took the 99K distribution on Nov 12, 2020 and they re-invested 33K on April 10th, 2021.  Does anyone know what their adjusted gross income will be?  $147K or $180K?.

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As you know, to qualify for this distribution, you auto certify and they conditions are very relaxed. The administrator can distribute the money as long as the tax payer says that either spouse or household member has been financially or medically affected by Covid-19. I am yet to see one of my clients that has not been affected by Covid-19.

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  • Pacun changed the title to Covid-19 100k distribution re-invest reporting on 1040

The $33K recontribution before 4/15/21 would reduce the $33K ratable portion that would otherwise be included for 2020, so if this is the only amount that is recontributed, the taxpayer will include the following amounts in each of the years:  -0- for 2020, $33K for 2021, and $33K for 2022.

The following page at IRS.gov is the Q&A clarifications for retirement contributions taken under the CARES Act:  https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers .  Items #6 & 7 covers only the most basic example of recontributions and refers readers to additional examples given in Notice 2005-92 for similar distributions that were allowed to help victims of Hurricane Katrina.

Notice 2005-92 has the additional examples starting on page 12 in Section 4, specifically Items D through F and is found at the link below. The case you provided above matches the fact pattern in Item E, example #1. 




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