01 Apr How do I report a coronavirus distribution on my taxes?

Q. My wife and I took out money from her 401(k) as a coronavirus-related distribution. We claimed the income on 2020 taxes with the 1099 sent to us. However, we used Form 8915-E and only paid taxes on one-third of the income and we want to pay the rest over the next two years. Now we are filing our 2021 taxes and cannot figure out how to claim the next third of the income to pay the next third of taxes. We are using TaxAct and last year it prompted me to use Form 8915 but this year it is not even seeing the income as we do not have another 1099 to input. What do we do?
— Taxpayer

A. First let’s review how taxes can be repaid on coronavirus-related distributions.

Per the IRS website:

“Q6. When do I have to pay taxes on coronavirus-related distributions?

“A6. The distributions generally are included in income ratably over a three-year period, starting with the year in which you receive your distribution. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you would report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. However, you have the option of including the entire distribution in your income for the year of the distribution.”

As you noted, you should report the second third of the distribution on your 2021 return, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

He said for tax year 2020, IRS Form 8915-E was used.

Starting in tax year 2021, the IRS form to use is 8915-F, he said.

“If the reader does not see that form on their tax software, I recommend they reach out to the software maker to inquire about it,” he said. “I know some tax programs certain forms were delayed this year till they were given final approval.”

He said you may want to try updating the software first as the form may not have been available when you first downloaded the program.

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This story was originally published on April 1, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.