I imported my 1099Rs to the desktop version. I converted an annuity to a monthly income stream and understand this distribution code (6 - Nontaxable 1035 exhange). (The exchange happened in late 2022 but payments didn't start until Jan 2023.) The Federal return forms handle this 1099R fine.
When I get to the PA forms, under a page header "Schedules of Gains and Losses" I'm prompted for the Cost Basis for this 1099 (code 6). I assume is the value under 1099R box 5 (Employee Contributions) - which was already imported and shows in the Fed section. Why ask a again?? Are gains on the Annuity funds taxed in PA at this junction? (when exchanging to begin annuity payments?)
Below that 'cost basis' entry, there are checkbox questions, the first of which is "This sale is not taxable in PA" - not sure HOW TO ANSWER THAT! I know there is a gain from my initial investment but don't really know WHEN or IF that is taxed in PA. I'm kind of stumped here. Was hoping Turbo Tax Pennsylvania tax experts would have built in the appropriate answer - or bypass the PA capital gain Sch D all together as appropriate!
Since payments started in Jan 2023, I don't have a 1099R to see how these annuity payments are reported... I recall my financial guy mentioning what portion of each annuity payment would be taxable, so I'm assuming that I'll get a 1099R for those payments showing it as "fully taxable" (like my pension 1099Rs.) However, retirement income is not taxed in PA, so I'm assuming this annuity will not be taxed either.
Bottom line: Are the gains on my annuity ever taxable in PA? If so, when (at exchange or as payments occur?) ...things were going smoothly until that 'cost basis' question snagged me! Thanks for any help! @Code 6 @pacapital gain
