COVID distribution made on 10/27/2021?

Forum|Forum|3 years ago
February 1, 2023
2 replies
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I have a new client that received a distribution from their 401K on Oct 27 and Dec. 8 of 2021. They reported the amount on Form 8915-F for 2021 and to be taxed over 3-years beginning in 2021 also exempt from the 10% early withdrawal penalty. They reported COVID as the Fema number for the Disaster and their reason was due to COVID and being laid off. Disaster Year check for 2020 and distribution/tax year for filing form 8915-F is 2021.

I can't find how this can be reported as a Qualified Disaster retirement Plan Distribution because it was distributed in 2021 and after also the June 25, 2021? I would have reported this as a Early Distribution in 2021 subject to the 10%.

Am I missing something here? thanks

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Best answer by TaxGuyBill

If you prepare the 2022 return, yes, I would do it without the 1/3 distribution.

You should tell them of the 2021 error and tell them it should be amended. You can't make them amend it and whether they do it or not won't affect the correct 2022 return. But they should know that if they don't amend, the IRS will send notices (unsure if they will be for 2021 for doing it wrong, or 2022 for a supposedly missing 1/3 distribution).

If they don't amend and if you decide to prepare 2022, I would make sure that you have everything in writing and that they signed what you told them. Otherwise, they could "throw you under the bus" and blame you when they receive IRS notices.