1099 R

[1vladimir1]

I bought annuity with money from bank account but changed mind and withdrew the purchase in 20 days. The insurance company returned money back to me as a check and I deposited it back to bank. Now I received 1099 R indicating this amount as a gross distribution with the distribution code 7D. This distribution now is added to my income for 2020. I don't think this is correct because I practically cancel the purchase and went out the contract. Thank you. 

[npierson7]

Most new annuity contracts have a provision called the free look period that gives the purchaser 10 to 30 days to consider the terms of the contract. You can find the information on first or a few first pages of your annuity contract, or you might ask your insurance company what your free look period was. It is important to know, because if you withdraw your money withing the free look period, there should not be penalties of any kinds. Otherwise, unfortunately, it considers as annuity distribution and subject to penalties and must be included in your income. 

[dmertz]

If 20 days was within the free-look period, this Form 1099-R should have $0 in box 2a.  With $0 in box 2a, it should be shown in the summary as nontaxable income.  It's income only in the sense that it must be present on line 5a of Form 1040 where it has no effect on the rest of your tax return.