Need Help Understanding CARES Act COVID Withdrawal Repayment and Roth IRA Conversion

The CARES Act withdrawal and Roth conversion are actually separate tax events, so let me help clarify this for you. When you took the CARES Act withdrawal, you had three tax options: 1) pay all taxes in the year of withdrawal, 2) spread the income over three years (2020-2022), or 3) repay some or all of it within the three-year window to avoid taxation on the repaid portion. If you repay the full CARES Act withdrawal now, you'll essentially undo that distribution for tax purposes. If you already paid taxes on it for 2020, you can file an amended return to get those taxes back. If you're spreading the taxes over three years, you'll avoid future tax payments on that distribution. Regarding your Roth conversion question - converting your Traditional IRA to Roth is completely separate. You'll pay ordinary income tax on the converted amount in the year you do the conversion. Since you mention your income is still relatively low, this might be an ideal time. You're not being double-taxed on the same money. The CARES withdrawal and the Roth conversion are different pools of money with their own tax treatments. If you repay the CARES withdrawal, you avoid taxes on that money completely.

I used taxr.ai when I was in a similar situation with a CARES Act withdrawal and subsequent Roth conversion. I was totally confused about the tax implications and worried about making a costly mistake. After spending hours on IRS publications and getting conflicting advice, I stumbled across https://taxr.ai and uploaded my documentation. They analyzed everything and gave me step-by-step guidance on how to handle both the CARES Act repayment and my Roth conversion strategy. Their system detected that I had selected the 3-year tax spread on my CARES withdrawal but was planning to repay it, which would've created reporting complications. They explained exactly which forms I needed, how to document the repayment, and how to structure my Roth conversion to minimize my tax liability. Super helpful for navigating these complex retirement account transactions.

I wanted to follow up about my experience with taxr.ai after asking about it here. I decided to give it a try since my CARES Act repayment situation was driving me crazy. Honestly, it was so much more helpful than I expected! When I uploaded my documents, they immediately identified that my old 401k plan had been terminated (which was causing my confusion). They explained that I could make the CARES Act repayment to my Traditional IRA and provided exact instructions for how to code it with my brokerage so it wouldn't count toward contribution limits. They even created a custom letter template for me to send with my repayment and explained exactly how to report it on Form 8915-E when it becomes available. I've already made the repayment and feel confident about the tax handling now. This saved me so much stress and probably a lot of money in potential tax mistakes!

I was in a similar situation with trying to repay a CARES withdrawal but kept getting stuck in endless IRS phone queues trying to get clarification. After three weeks of trying, I finally used https://claimyr.com to get through to an IRS agent. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an agent picks up. I was super skeptical at first, but I was desperate to get answers before the repayment deadline. I got a call back in about 45 minutes with an actual IRS representative on the line who confirmed exactly how to handle my CARES repayment and Roth conversion situation. The agent explained that I needed to make sure my financial institution coded the repayment correctly as a rollover contribution due to coronavirus-related distribution, and that I would need to file Form 8915-E. Having that official confirmation was so reassuring compared to getting conflicting advice online.

I need to eat my words about being skeptical. After seeing the responses here, I decided to try Claimyr because I was desperate to speak with the IRS about my CARES Act repayment situation. I've been trying for MONTHS to get official clarification. I used the service yesterday and got connected to an IRS agent in about an hour. The agent was able to confirm that my CARES Act repayment should go to my Traditional IRA since my old 401k is no longer available, and that it wouldn't count toward contribution limits. They also explained exactly how to document it for tax purposes. What would have been another month of stress and uncertainty was resolved in one conversation. The agent even explained how the upcoming Form 8915-E will work with my repayment situation. I'm honestly shocked at how well this worked after all my failed attempts to call directly. Sometimes you have to admit when you're wrong!

Just a heads up about something nobody's mentioned yet - when you repay a CARES withdrawal, make sure you tell your IRA provider specifically that it's a CARES Act repayment! I repaid mine earlier this year and my provider initially coded it as a regular contribution, which would have put me way over the annual limit. I had to call them and have them recode it as a "rollover contribution due to coronavirus-related distribution" on their end. Also, keep VERY detailed records of everything - your original distribution paperwork, the repayment, and any tax forms. You'll need this documentation when you file your taxes and potentially for years afterward if you get audited.

Has anyone considered the pro/cons of NOT repaying the CARES withdrawal? I took about $30k out and am now able to repay, but I'm wondering if it might actually be better to just pay the taxes (I selected the 3-year option) and keep the money out? My reasoning is that I'm 52 and might get more benefit from using that money now rather than having it locked away until retirement.

I went through a very similar situation last year and want to share what I learned. First, definitely make sure you understand which tax treatment you originally elected for your CARES withdrawal - this makes a big difference in how the repayment works. One thing that caught me off guard was the timing. Even though you have until the 3-year deadline to repay, you need to make sure you do it in the right tax year if you want the tax benefits for that year. I almost missed this and would have had to wait until the following year to get my refund. Also, regarding your Roth conversion question - since you mentioned your income is still relatively low, this could be a great opportunity. You're essentially paying taxes now at lower rates to avoid potentially higher rates later. Just make sure you have enough cash outside of retirement accounts to pay the conversion taxes without touching the converted funds. Have you calculated what your total tax liability would be for both the CARES repayment (if you don't repay) and the Roth conversion? That might help you decide the optimal strategy.