Form 8915-E for retirement plans
Recently, many people have found their lives upside down – out of work, working less, furloughed, or experienced a natural disaster. Congress enacted relief to ease the financial burden of those incurring disaster losses or have suffered financially due to the Coronavirus. With those relief measures, the IRS released Form 8915-E. The relief allows taxpayers to access retirement savings earlier than they normally would be able to.
In this post, you can learn more about Form 8915-E, including qualified disaster distribution details, instructions for Form 8915-E, and how to get help completing the form.
What is a qualified disaster distribution?
Before we discuss Form 8915-E, we should define “what is a qualified disaster distribution?”
Normally, if you draw retirement account funds earlier than age of 59 ½, you are subject to a 10% additional tax on early distributions. For SIMPLE IRA plans, a 25% additional tax on early withdrawals may apply if you take a distribution in the first two years of participation.
Through the CARES Act of 2020, the government issued coronavirus tax relief for qualified retirement distributions for distributions of up to $100,000 from eligible retirement plans. Qualified retirement distributions can also be made in federally declared disaster areas.
In addition to waiving the 10% early withdraw penalty, affected participants can:
- Borrow more funds as a plan loan
- Include qualified disaster distributions in income over three years (in equal parts – beginning with the year that includes the distribution date)
- Repay loans over a longer period
- Repay qualified disaster distributions within three years of receiving a distribution by making one or more contributions
Who qualifies for qualified disaster retirement plan distributions and repayments?
If you, your dependent, spouse, or a member of your household withdrew from certain retirement accounts in 2020 prior to the age of 59 ½, you may qualify for the qualified disaster retirement plan distribution and repayment.
Form 8915-E lets you report the penalty-free distribution
If eligible, complete and file Form 8915-E to report the distribution. You can qualify for a penalty-free distribution if you, your spouse, or dependent was:
- Diagnosed with coronavirus by a CDC-approved test
- Experienced coronavirus-related adverse financial conditions as a result of:
- Being quarantined, furloughed, laid off, or having work hours reduced
- Being unable to work due to lack of childcare
- Having to close or reduce hours of a business owned or operated by the affected individual
- Having a reduction in pay or self-employment income or having a job offer rescinded or delayed
The tax on a coronavirus-related distribution is paid over three tax years (2020, 2021, and 2022). Or, you can opt to pay the entire tax liability with your 2020 tax return. The distribution is not subject to the 10% additional tax. You can recontribute some or all of the distribution at any time during the three-year period. Need an example of the application of the three-year spread? Tune into this post from The Tax Institute.
To ensure you qualify to treat a distribution reported on Form 1099-R as a qualified disaster distribution, answer the questions listed on Form 8915-E to determine your eligibility.
Instructions for Form 8915-E
Need instructions for Form 8915-E? On the top of the form, enter your name and Social Security number. Under this line, complete the form fields listing your physical address. Then, fill out the following sections that apply to your situation:
- Part I: Total Distributions From All Retirement Plans (Including IRAs)
- Part II: Qualified 2020 Disaster Distributions From Retirement Plans (Other Than IRAs)
- Part III: Qualified 2020 Disaster Distributions From Traditional, SEP, SIMPLE, and Roth IRAs (If you’re filling out this section, you might have to also complete Form 8606)
- Part IV: Qualified Distributions for the Purchase or Construction of a Main Home in Qualified 2020 Disaster Areas
Most taxpayers don’t need to sign the form, because it’s usually filed as part of your tax return. Sign at the bottom of page two if you are filing Form 8915-E by itself and not with your tax return.
When will Form 8915-E be available?
The 8915-E form is currently available to all American taxpayers.
More help with Form 8915-E
If you think you qualify for a qualified disaster distribution and need help completing the 8915-E tax form, get help!
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