How to handle CARES Act 401k Withdrawal Repayment and Need to Refile Taxes

You'll definitely need to amend your 2020 return to report the distribution. The CARES Act allowed for special treatment of COVID-related distributions up to $100,000, spreading the income over three years (2020, 2021, 2022) unless you elected to include it all in 2020. You also had three years to repay the distribution to avoid taxes. Since your 401k was rolled to an IRA, you actually can repay the CARES Act distribution to that IRA even if it exceeds the normal contribution limits. CARES Act repayments are considered rollovers, not contributions, so they don't count toward your annual $6,500 limit. You have until your tax filing deadline plus extensions for the third year after the distribution (likely around October 2023, depending on when you took the distribution in 2020). If you've missed that window or can only repay part of it, you'll need to amend your 2020 return to report the full distribution, then show any amount you've repaid as a rollover. For any unreturned amount, you'll pay taxes (and likely penalties if you were under 59½).

I went through something similar with a CARES Act withdrawal. I found this tool called taxr.ai (https://taxr.ai) that was super helpful in figuring out how to handle my amendment. I was confused about how to properly report the withdrawal and potential repayment, and they analyzed my situation and walked me through the exact forms I needed. They explained that my repayment would be considered a rollover contribution, not subject to the annual IRA contribution limits, which saved me a ton in taxes. They also showed me exactly how to fill out Form 8915-E for the CARES Act distribution and how to properly amend my return.

Just wanted to follow up and say I tried taxr.ai after seeing it mentioned here. It was seriously helpful for my CARES Act repayment situation. I uploaded my 2020 return and they analyzed exactly what I needed to do to fix my unreported distribution. The tool confirmed I could repay to my IRA even though it wasn't the same account I took the money from, and walked me through how to document it properly. They even created a customized amended return that showed exactly how to report it on Form 8915-E. I was able to avoid most of the taxes I thought I'd have to pay by making the repayment before the deadline. Wish I'd known about this earlier instead of stressing for months!

Just wanted to follow up and say I tried taxr.ai after seeing it mentioned here. It was seriously helpful for my CARES Act repayment situation. I uploaded my 2020 return and they analyzed exactly what I needed to do to fix my unreported distribution. The tool confirmed I could repay to my IRA even though it wasn't the same account I took the money from, and walked me through how to

If you're struggling to get clear answers from the IRS about your CARES Act repayment options, I'd recommend Claimyr (https://claimyr.com). I was in a similar situation and couldn't get through to anyone at the IRS for weeks. Claimyr got me connected to an actual IRS agent in about 15 minutes when I'd been trying for days on my own. The agent confirmed that I could make the rollover contribution to my IRA even though it was different from my original 401k, and gave me the exact documentation I needed to include with my amended return. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c When you're dealing with something as specific as CARES Act repayments, getting official guidance directly from the IRS gives you so much more confidence that you're handling it correctly.

I have to admit I was completely wrong about Claimyr. After seeing it mentioned here, I tried it as a last resort for my CARES Act questions. I was shocked when I got a call back saying they had an IRS agent on the line waiting to speak with me. The agent walked me through my specific situation with my 401k distribution that I hadn't reported properly, and confirmed I could still make a repayment to my current retirement account as a rollover. They also explained the deadline extension provisions I qualified for, which I had no idea about. Just got confirmation that my amended return was processed correctly. Seriously went from thinking I was going to owe thousands in penalties to getting most of it sorted properly. Worth every penny just for the peace of mind.

Don't overthink this! File a 1040-X to amend your 2020 return. Report the distribution on the appropriate lines. If you're going to repay it, you'll need to hurry before the 3-year window closes. Even partial repayment is better than nothing. You'll still owe taxes on whatever portion you can't repay. The CARES Act did offer the option to spread the taxable amount over 3 years (2020-2022), but you'd need to have elected that on your original return. Since you didn't report it at all, you might not be eligible for this option anymore.

Has anyone used a tax advocate service for something like this? I'm also dealing with a CARES Act issue and wondering if that might help me navigate it.