Special rules provided for tax-favored withdrawals, repayments, and loans from certain retirement plans for individuals who suffered economic losses as a result of the May 4, 2007, Kansas storms and tornadoes and applied to distributions received before 2009 as qualified recovery assistance distributions (defined later). While qualified recovery assistance distributions cannot be made after 2008, the special rules explain how much of a qualified distribution has to be included in income after 2008, and when an amended return must be filed to reduce the amount of a qualified distribution previously included in income as a result of a repayment after 2008.

Except as provided below, a qualified recovery assistance distribution is any distribution you received and designated as such from an eligible retirement plan if all of the following apply.

1. The distribution was made after May 3, 2007, and before January 1, 2009.
2. Your main home was located in the Kansas disaster area on May 4, 2007. For a definition of main home, see Publication 4492-A, Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes.
3. You sustained an economic loss because of the storms and tornadoes. Examples of an economic loss include, but are not limited to:
   1. Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause;
   2. Loss related to displacement from your home; or
   3. Loss of livelihood due to temporary or permanent layoffs.

If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified recovery assistance distribution, regardless of whether the distribution was made on account of the storms and tornadoes. Qualified recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss.

The total of your qualified recovery assistance distributions from all plans 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 choose.

A reduction or offset after May 3, 2007, of your account balance in an eligible retirement plan in order to repay a loan could also have been designated as a qualified recovery assistance distribution.

Qualified recovery assistance distributions are included in income in equal amounts over three years. However, if you chose, you could have included the entire distribution in your income in the year it was received.

Qualified recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% 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 recovery assistance distribution limit may be subject to the additional tax on early distributions.

If you choose, you generally can repay any portion of a qualified recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Also, you can repay a qualified recovery assistance distribution made on account of a hardship from a retirement plan. However, see Exceptions below for qualified recovery assistance distributions you cannot repay.

You have three years from the day after the date you received the distribution to make a repayment. Amounts that are repaid are treated as a qualified rollover and are not included in income. Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. See Form 8915 for more information on how to report repayments.

You cannot repay the following types of distributions.

1. Qualified recovery assistance distributions received as a beneficiary (other than a surviving spouse).
2. Required minimum distributions.
3. Periodic payments (other than from an IRA) that are for:
   1. A period of 10 years or more,
   2. Your life or life expectancy, or
   3. The joint lives or joint life expectancies of you and your beneficiary.

If you make a repayment in 2010, the repayment may reduce the amount of your qualified recovery assistance distributions that were previously included in income. You may need to file an amended return to refigure your taxable income if:

• You elected to include all of your qualified recovery assistance distributions in income in the year of the distributions (not over 3 years) on your original return, and
• The amount of the repayment exceeds the portion of the qualified recovery assistance distributions that are includible in income for 2010, and you choose to carry the excess back to your 2009 (or if applicable, 2007 or 2008) tax return.

File Form 1040X 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.