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Tapping Retiremenent Account Early in 2020


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6 hours ago, Abby Normal said:

If the tax is right on the return, regardless of how I got there, I almost never amend the return.

Absolutely agree. I’m only concerned about the possibility of a letter to a client. Always a time waster. There is no chance of getting paid either.  I would hope IRS would not chase this rabbit.  Waste of their time, too. 

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On 2/18/2021 at 12:05 PM, RitaB said:

Alright.  I sent three returns for clients who didn't want to take advantage of reporting the early distribution over three years.  I used Form 5329 only.  They were accepted.  THEN I happen to read on the ATX Form 5329, under Part I, that we don't use this Form for coronavirus related distribution. 

I noticed just now that the IRS pdf for 2020 Form 5329 does not have that instruction against using the form for coronavirus distribution.

Just throwing this out there.  No idea if we that used 5329 should amend to include 8715-E or not. 

I have three others that I will hold onto and use 8715-E.  And yes, I have tried to dissuade folks from shooting themselves in the foot by not spreading the income over three years.  They have already shot themselves in the foot by taking distributions they didn't need while the market was down.  There's no helping these folks:  "Oh, your hours were cut causing your income to be 4,000 less.  It makes perfect sense to take out 90,000 from your 401k.  Ok."

That sounds familiar!  I had a client call me up late afternoon on NYE.  Thinking of taking a couple hundred thou out of his retirement.  No Covid problem, he actually made $100k in 2020, was amazed it was that high.  Maybe buy another house, planning to retire in a year or two.....  After going round and round, the reason he wanted to do it was he heard that Dems would raise taxes on people making $400k. 
Um - you just told me you were amazed your income went up to $100k, and you want to clean out your retirement in fear of that quadrupling in the next 2 years??!

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but I cannot find on the worksheet anymore where covid is writtren?? was it changed for the 8915?

I have read and read  - I swear it was there and now it is not!

So when I use the 8915 - it taxes it but if I put the info in the 1099-R - it also taxes it!!

no penalty but records it 2x - double income -

Do I not put it into the 1099-R?

 

confused!!

D

 

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