In June, 2023, I inherited a non-qualified annuity from my cousin who was 10.5 yrs. younger than I. I am 76. In order to incur the least amount of tax, on my Death Benefit Claim Form I chose the Option G- Stretch (Life Expectancy) Distribution. I was told by the annuity company that my life expectancy was 14.1 years. Beginning in Sept., 2023, I received a monthly check for the last four months of the year. I specifically asked and was told that my Cost Basis was $16,670.01. The earnings brought the value I inherited to $33,770.33.
I was told by the annuity company and the broker that the rule is Last In, First Out (LIFO). I pay quarterly tax estimates so I increased my 4th quarter estimate by 30% of the total annuity received for 2023. My 1099-R shows $2,394.25 in Boxes 1 and 2a, the amount I received. Box 7 shows 4D. My question is: Is there any reason that I have to file General Rule or can I just enter the 1099-R numbers and ignore it? I do not believe I am eligible for General Rule and certainly don’t want the hassle! My thinking is that in about 7 years I will be down to my Cost Basis and then my monthly payments will be non-taxable.
Thank you so much. I have researched this for hours but since I use TurboTax each year, this Community Forum has come the closest to my situation and I just need clarification.
