I understand what you are saying, however that amount is not a death benefit from a life insurance policy but is an annuity that was purchased from an insurance company. It is being correctly taxed by TurboTax.
Code 4 is death and Code D is Annuity payment.
This is an annuity purchased from a life insurance company, not a life insurance payout.
Yes, it is taxable income. These deferred accounts do not get a stepped-up basis on death. The issuer of the annuity may be able to give you some more detail on this investment.
The 1099R needs to get entered in TurboTax as follows:
To enter pension and annuity Payments (1099-R)
- Click on Federal Taxes
- Click on Wages and Income
- Click on I'll choose what I work on (if shown)
- Scroll down to Retirement Plans and Social Security
- On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button
- Make sure all the boxes from the 1099R are entered in the program. This is where the credit will be given for the amount of taxes withheld in box 4 of the 1099R.
