My cousin passed away in 2021 and I inherited a portion of her annuity (as did my 2 sisters). I took out the total amount of about $19K in 2023. The taxable amount was about $9K. Box 7 on the 1099-R showed "4D". 4 for death and D for annuity payment from non-qualified annuities. When I select the two codes in TT "4" and "D" it increases my IL State Income Tax. If I just key in "4" I don't owe IL income tax. So my two specific questions are (1) Does IL tax inherited non-spousal annuities if they are non-qualified? NOTE: IL does NOT tax IRA, 401IK and Pensions so I was surprised that it appears they tax annuities. (2) TT asks if this was considered an RMD. Are there RMDs for non-qualified annuities? Not sure how to answer the RMD questions that TT asks. I don't believe I had to take an RMD on this annuity as long as it was fully distributed within 5 year (starting in 2021). Since I took a total distribution all at one time does it really matter how I answer the TT questions about RMDs? BTW, I have not reached RMD age and will not for several years.
