| Publication 590 |
2008 Tax Year |
4.
Hurricane-Related Relief
Special rules applied to withdrawals, repayments, and loans from certain retirement plans (including IRAs) for taxpayers who
suffered an economic
loss as a result of Hurricane Katrina, Rita, or Wilma. While qualified hurricane distributions cannot be made after December
31, 2006, the special
rules still apply to repayments of these distributions.
If you received a qualified hurricane distribution, it is taxable, but is not subject to the 10% additional tax on early distributions.
The taxable
amount is figured in the same manner as other IRA distributions. However, the distribution is included in income ratably over
3 years unless you
elected to report the entire amount in the year of distribution. You can repay the distribution and not be taxed on the distribution.
See
Qualified Hurricane Distributions, later.
Form 8915, Qualified Hurricane Retirement Plan Distributions and Repayments, is used to report qualified hurricane distributions
and repayments.
For information on other tax provisions related to these hurricanes, see Publication 4492, Information for Taxpayers Affected
by Hurricanes
Katrina, Rita, and Wilma.
Qualified Hurricane Distributions
A qualified hurricane distribution is any distribution you received in 2005 or 2006 from an eligible retirement plan (including
IRAs) if all of the
following conditions apply.
-
The distribution was made:
-
After August 24, 2005, and before January 1, 2007, for Hurricane Katrina.
-
After September 22, 2005, and before January 1, 2007, for Hurricane Rita.
-
After October 22, 2005, and before January 1, 2007, for Hurricane Wilma.
-
Your main home was located in a qualified hurricane disaster area listed below on the date shown for that area.
-
August 28, 2005, for the Hurricane Katrina disaster area. For this purpose, the Hurricane Katrina disaster area includes the
states of
Alabama, Florida, Louisiana, and Mississippi.
-
September 23, 2005, for the Hurricane Rita disaster area. For this purpose, the Hurricane Rita disaster area includes the
states of
Louisiana and Texas.
-
October 23, 2005, for the Hurricane Wilma disaster area. For this purpose, the Hurricane Wilma disaster area includes the
state of
Florida.
-
You sustained an economic loss because of Hurricane Katrina, Rita, or Wilma and your main home was in that hurricane disaster
area on the
date shown in item (2) for that hurricane. Examples of an economic loss include, but are not limited to (a) loss, damage to,
or destruction of real or
personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; (b) loss related to displacement from
your home; or (c) loss
of livelihood due to temporary or permanent layoffs.
If you met all these conditions, you generally could have designated any distribution (including periodic payments and required
minimum
distributions) from an eligible retirement plan as a qualified hurricane distribution, regardless of whether the distribution
was made on account of
Hurricane Katrina, Rita, or Wilma. Qualified hurricane distributions were permitted without regard to your need or the actual
amount of your economic
loss.
Distribution limit.
The total of your qualified hurricane distributions from all plans for 2005 and 2006 was limited to $100,000. If you
had distributions in excess of
$100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you could have allocated the $100,000 limit among
the plans, any way you
chose.
Example.
In 2005, you received a distribution of $50,000. In 2006, you received a distribution of $125,000. Both distributions
met the requirements for a
qualified hurricane distribution. If you decided to treat the entire $50,000 received in 2005 as a qualified hurricane distribution,
only $50,000 of
the 2006 distribution could have been treated as a qualified hurricane distribution.
Main home.
Generally, your main home is the home where you live most of the time. A temporary absence due to special circumstances,
such as illness,
education, business, military service, evacuation, or vacation will not change your main home.
Eligible retirement plan.
An eligible retirement plan can be any of the following.
-
A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan).
-
A qualified annuity plan.
-
A tax-sheltered annuity contract.
-
A governmental section 457 deferred compensation plan.
-
A traditional, SEP, SIMPLE, or Roth IRA.
Additional 10% tax.
Qualified hurricane distributions are not subject to the 10% additional tax (including the 25% additional tax for
certain distributions from SIMPLE
IRAs) on early distributions from qualified retirement plans (including IRAs). However, any distributions you received in
excess of the $100,000
qualified hurricane distribution limit may have been subject to the additional tax on early distributions.
Repayment of Qualified Hurricane Distributions
Most qualified hurricane distributions are eligible for repayment to an eligible retirement plan. Payments received as a beneficiary
(other than a
surviving spouse), periodic payments (other than from IRAs), and required minimum distributions are not eligible for repayment.
Periodic payments, for
this purpose, are payments that are for (a) a period of 10 years or more, (b) your life or life expectancy, or (c) the joint
lives or joint life
expectancies of you and your beneficiary. For distributions eligible for repayment, you have 3 years from the day after the
date you received the
distribution to repay all or part to any plan, annuity, or IRA to which a rollover can be made. Within the time allowed, you
may make as many
repayments as you choose. The total amount repaid cannot be more than the amount of your qualified hurricane distributions.
Amounts repaid are treated
as a qualified rollover and are not included in income. The way you report repayments depends on whether you reported the
distributions under the
3-year method, or you elected to report the distributions in the year of distribution.
Repayment of distributions if reporting under the 1-year election.
If you elected to include all of your qualified hurricane distributions received in a year in income for that year
and then repay any portion of
the distributions during the allowable 3-year period, the amount repaid will reduce the amount included in income for the
year of distribution. If the
repayment is made after the due date (including extensions) for your return for the year of distribution, you will need to
file a revised Form 8915
with an amended return. See Amending Your Return, later.
Repayment of distributions if reporting under the 3-year method.
If you are reporting the distribution in income over the 3-year period and you repay any portion of the distribution
to an eligible retirement plan
before filing your 2007 tax return by the due date (including extensions) for that return, the repayment will reduce the portion
of the distribution
that was included in income in 2007. If you repay a portion after the due date (including extensions) for filing your 2007
return, the repayment will
reduce the portion of your distribution that is includible on your 2008 return. If, during a year in the 3-year period, you
repay more than is
otherwise includible in income for that year, the excess may be carried forward or (after 2005) back to reduce the amount
included in income for that
year.
Example.
John received a $90,000 qualified hurricane distribution from his pension plan on November 15, 2006. He does not elect to
include the entire
distribution in his 2006 income. Without any repayments, he would include $30,000 of the distribution in income on each of
his 2006, 2007, and 2008
returns. On November 10, 2007, John repays $45,000 to an IRA. He makes no other repayments during the allowable 3-year period.
John may report the
distribution and repayment in either of the following ways.
-
Report $0 in income on his 2007 return, and carry the $15,000 excess repayment ($45,000 - $30,000) forward to 2008 and reduce
the
amount reported in that year to $15,000, or
-
Report $0 in income on his 2007 return, report $30,000 on his 2008 return, and file an amended return for 2006 to reduce the
amount
previously included in income to $15,000 ($30,000 - $15,000).
Repayment of qualified hurricane distribution to a Roth IRA.
If you make a repayment of a qualified hurricane distribution to a Roth IRA, the repayment is first considered to
be a repayment of earnings. Any
repayment of a qualified hurricane distribution in excess of earnings will increase your basis in the Roth IRA by the amount
of the repayment in
excess of earnings.
Example.
In 2005, Ned takes a $30,000 qualified hurricane distribution from a Roth IRA. The $30,000 is the total value of the
Roth IRA. He has $20,000 in
basis (contributions) and $10,000 represents earnings. He elects to include the entire distribution in income for 2005. In
2005, he reports the
distribution on Form 8606 and Form 8915 and determines that the taxable portion of the distribution is $10,000 ($30,000 -
$20,000).
In 2007, Ned makes a $15,000 repayment of the 2005 qualified hurricane distribution to his Roth IRA. He will file
an amended return for 2005 for
the $10,000 taxable portion of the distribution that was included in income. $5,000 of the $15,000 repayment will represent
basis in his Roth IRA for
future distributions. $10,000 will be included in income when distributed in the future.
If, after filing your original return, you make a repayment, the repayment may reduce the amount of your qualified hurricane
distributions that
were previously included in income. Depending on when a repayment is made, you may need to file an amended tax return to refigure
your taxable income.
If you make a repayment by the due date of your original return (including extensions), include the repayment on your amended
return.
If you make a repayment after the due date of your original return (including extensions), include it on your amended return
only if either of the
following apply.
-
You elected to include all of your qualified hurricane distributions in income in the year of the distributions (not over
3 years) on your
original return.
-
The amount of the repayment exceeds the portion of the qualified hurricane distributions that are includible in income for
2007 and you
choose to carry the excess back to your 2005 or 2006 tax return.
Example.
You received a qualified hurricane distribution in the amount of $90,000 on October 15, 2006. You choose to spread the $90,000
over 3 years
($30,000 in income for 2006, 2007, and 2008). On November 19, 2007, you make a repayment of $45,000. For 2007, none of the
qualified hurricane
distribution is includible in income. The excess repayment of $15,000 can be carried back to 2006. Also, rather than carry
the excess repayment back
to 2006, you can carry it forward to 2008.
File Form 1040X, Amended U.S. Individual Income Tax Return, to amend a return you have already filed. Generally, Form 1040X
must be filed within 3
years after the date the original return was filed, or within 2 years after the date the tax was paid, whichever is later.
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