Tax Year 2020 Retirement Provisions: CARES ACT

For tax year 2020, taxpayers who were negatively impacted by COVID-19 were eligible to:

• Withdraw from retirement without receiving the 10% early withdrawal penalty for being younger than 59 1/2
• Divide the taxable amount of their withdrawal over a 3 year period

Taxpayers may have elected to utilize both, one, or neither of these options. 

These options were for tax year 2020 ONLY. The same exemptions for retirement, for early withdrawal penalties and disaster related distributions that existed pre-COVID are still available.

Exempting Retirement From The 10% Early Withdrawal Penalty Tax Year 2020

1. Navigate to the bottom of Form 1099-R.

2. Enter 12 in the Penalty Exception Code Box.

Electing To Spread The Withdrawal Over 3 Years

1. Navigate to the bottom of Form 1099-R.

2. Enter the amount of qualified coronavirus distribution.

The amount of retirement to be taxed on this return will display on Form 8915-E Line 11 (distributions from accounts other than IRA's) or Line 19 (IRA distributions)

Taxpayers who elected to spread their retirement distribution will pay 1/3 of the tax in 2020, 1/3 of the tax in 2021, and the final 1/3 of the tax in 2022.