Qualified individuals may spread the taxable portion of one or more distributions
(up to $100,000 in total) from a retirement plan (qualified pension, profit-sharing,
stock bonus plan, IRA, 401(k), 403(b), 457(b))
across three years if taken between 1/1/2020 and 12/30/2020.
See Pub 4012 for the definition of "qualified individual".
(TABLE A below)
During the 3-year period, the taxable amount can be reduced by recontributing
(paying back) all or part of the taxable distribution. None of the distribution
will be taxable if fully repaid by the April 2023 due date of the 2022 return.
If an amount is taxed and is repaid in a later year, amended returns must be
filed for the prior year(s) to reduce the amount of taxable distribution and
claim a refund of the tax paid.
(TABLE B below)
Note: The 10% penalty for an early distribution is also waived for
this case if otherwise applicable.
CAUTION: Neither 3-year option (deferral or repayment) is available if
the individual is not a qualified individual.
TIP: The distribution(s) can be before, during, or after the individual
satisfies the criteria.
DISCLAIMER: This worksheet is for discussion purposes only.
Resulting tax amounts do not incorporate many aspects of the tax code
(special taxation, credits, etc.) and may not match the results from the tax software.
Tax rates for 2022 are not yet known but have been adjusted to be similar
to the 2020 and 2021 changes.
A simple tax computation on ordinary income is made based on the amounts entered.
Tax options:
To use TABLE A:
Complete the tax return using the tax software assuming the distribution
is fully taxed in 2020 (less any amount paid back by April 15, 2021).
Enter figures for estimated AGI for years 2021 and 2022 assuming no part
of the distribution will be paid in those years.
The results for taxing the full amount in one year and the total tax
spreading the income over three years will be calculated (as an estimate).
TABLE A - ONE YEAR VS THREE YEAR COMPARISON
Return for Tax Year:
2020
2021
2022
Amount of distribution(s) in 2020 due to Coronavirus:
1-year tax option:
Adjusted gross income:
Taxable income:
Approximate tax amount:
3-year tax option:
Adjusted gross income:
Taxable income:
Approximate tax amount:
3-year total
tax paid
1-year option
3-year option
♣
The AGI for this year has been manually entered. To default to the 2020 AGI, delete the entry.
Repayment options:
To use TABLE B:
In the table below, enter any ADDITIONAL repayment planned to be
repaid before filing for the 2020 tax year (by 4/15/2021) not included in Table A above.
Enter the amounts repaid or planned to be repaid during the 2021 and 2022
tax years (by the April tax return due date for that year).
The "As-filed" tax amount is the amount of tax on that year's return
resulting from the payback amount entered for that year.
The "Revised" tax amount is the amount of tax on that year's return
resulting from payback amounts entered for later years.
The "Potential refund" is the amount of refund that would be recieved
by amending that year's return.
TABLE B - EFFECT OF PAYING BACK THE DISTRIBUTION
On return for Tax Year:
2020
2021
2022
Amount paid back by due
date of the following year:
1-year tax option:
Adjusted gross income:
Taxable income:
As-filed tax amount:
Revised tax amount:
Potential refund:
3-year tax option:
Adjusted gross income:
Taxable income:
As-filed tax amount:
Revised tax amount:
Potential refund:
†
The 2020 tax return will need to be amended to recover the excess tax paid in that year.
Amount recovered during year amended:
Year 2020 is amended:
2021
and 2022
only 2022
1-year option:
3-year option:
‡
The 2021 tax return will need to be amended to recover the excess tax paid in that year.