Cares Act Distribution
If someone distributed money from their IRA in 2020 under the Cares Act and wants to pay the money back into their IRA before they file their 2020 tax return, how should it be handled? Do they really need to file and then amend the 2020 return or can they write a letter to the IRS and include it with their return explaining what they did?
Secondly, if they pay it all back at once, how do they notate that since the distribution’s are expected to happen ratably over 3 years
Permalink Submitted by Alan - IRA critic on Tue, 2021-04-13 19:06
A CRD repayment may be made up to the due date including extensions for filing the 2020 return. If someone has not yet repaid the amount they intend to, they should file an extension by 5/17. That will avoid a 1040X. When filing, the CRD and the amount repaid are reported on Form 8915 E. Any partial repayment made by the deadline will be credited first to the 1/3 of CRD income reportable for 2020. Therefore, repay 1/3 and there will be no taxable CRD income for 2020. Etc for 2021 and 2022.
If they repay the entire CRD by the above deadline, they should elect to have the entire CRD reportable in 2020 instead of 1/3 over 3 years. With the repayment in full reported on Form 8915 E, this will be the final 8915 required in the 3 year period.