Annuity

[mmk25]

in December 2022, my husband took a gross distribution of $74,779.85 and then in late January 2023 he opened an annuity with the entire amount.   It looks like we are payting taxes on the amount in 2022 because I have nothing to off set the amount yet.   So is that correct, we pay taxes in 2022 on this amount?   what happens in 2023?

[JulieS]

It depends a few factors, including whether the distribution is from a qualified or non-qualified annuity and how long between the distribution and the replacement annuity. 

A qualified annuity is one that is in a tax-deferred retirement account like a 403(B) or an IRA. If your annuity was a qualified annuity and it was deposited into a qualified retirement account within 60 days, it can be treated as a rollover. Click here to learn about reporting a rollover.

If your annuity is a non-qualified annuity (not in a retirement account of any kind), the amount in box 2a of Form 1099-R is taxable regardless of where the money ended up. 

It is possible to exchange one annuity for another with out paying taxes, but the exchange must happen directly between insurance companies. You can't take the distribution and then find a new annuity later.