How should I enter a 1099-R for a non-qualified (non -retirement) annuity?

[jd061]

How should I enter a 1099-R for a non-qualified (non -retirement) annuity?

Turbotax is asking for the RMD amount, yet this is not a retirement account.

[macuser_22 · Accepted solution]

TurboTax asks the RMD question for any 1099-R if over age 70 1/2.

Virtually all pension plans, defined benefit plans, and annuities in existence today fall under section 401 of the tax code.

Required minimum distributions for defined benefit plans and annuity contracts all require RMD's after age 70 1/2.  If you receive periodic (monthly) payments from any pension plan you can be assured that the custodian of the plan is meeting the requirements so you can safely answer "yes" to the question.

The rules that the plan administrator must use to calculate the RMD as required by §401(a)(9) are defined in § 1.401(a)(9)-6) of the Internal Revenue Code (IRC).

The answer to the question does not go on your tax return, it is simply to make sure you do not owe any penalty for not taking the RMD or use it for an ineligible rollover.

The question is just to be sure that the requirement was met.

https://ttlc.intuit.com/replies/3302117

[Advisor]

Sorry

That is incorrect

A non qualified annuity doesn't have a RMD.

ONLY QUALIFIED annuities have RMD.

Turbo Tax needs to update their software.  It is very misleading.  The software needs to handle Qualified vs Non Qualified separately.

In this business 40 years.

[Critter]

Do tax-deferred annuities have required withdrawals at a certain age? Annuities are subject to the same RMD requirements if they are held inside an IRA. Nonqualified annuities (those held outside a retirement account) generally have no requirement to withdraw your funds at any age unless required by the annuity contract itself. Some contracts force distributions or annuitization to begin at a certain age, generally from age 85 to 100. A few contracts do not require distribution of the proceeds until death.

[macuser_22]

@Advisor - Don't be mislead by the apparent date of the question (6/6/2019).  This thread was migrated from the old answer exchange on that date but the question could be several years old.    TurboTax asks the RMD questions in two different places, first for each 1099-R that required a RMD and non-qualified annuities do not ask that question (at least for the 2018 software).    Later TurboTax will blindly ask for anyone over 70 1/2 if the years RMD has been taken for *any* qualified employer plans or Traditional IRA.     The answer does not go on a tax return, it is simply to be sure that any RMD obligation has been met and act as a reminder.   If there is no such account or requirment then simply answer that the RMD is not required.

[Advisor]

Got it! Thank you. I looked at the 1040 (forms) and I can see it is not affecting the Adjusted Gross income as suggested in the software.  Not sure who is reading this but the software needs to be updated as it is misleading. Appreciate the feedback.

[macuser_22]

I doubt that existing software will be changed.  The 2019 software should be available in  November or December - I will check then  to see if it still exists.

[mjg216]

The software has not been changed.  It still asks if a distribution from a non-qualified annuity is the full RMD.  It does not give you the choice of stating that no RMD is required or that it is inapplicable. 

[MayaD]

Simply select "yes" to the RMD question (Was this withdrawal RMD and all of this was RMD).  You will also be asked if the amount reported is paid periodically in equal amounts.  By selecting "yes" the RMD requirements are met and you may continue with the tax preparation.

The answer to the question does not go on your tax return, it is just to make sure you do not owe any penalty for not taking the RMD.

[adegoo]

I have a similar problem.  I am 56 and inherited an annuity (NOT a retirement account) from my 100-year-old grandmother.  This was not an IRA or other retirement account (they were farmers, so never had "retirement plans" as such).   I received a 1099-R for the annuity.  Do I call this “Private Distribution”, or “none of the above”?   Will I pay higher taxes because I am continuing to receive these non-qualified annuity payments?  (TT asked if I rolled them over to another retirement account or used them for other purchases — a red flag in my book).  

[macuser_22]

---

@adegoo wrote:

I have a similar problem.  I am 56 and inherited an annuity (NOT a retirement account) from my 100-year-old grandmother.  This was not an IRA or other retirement account (they were farmers, so never had "retirement plans" as such).   I received a 1099-R for the annuity.  Do I call this “Private Distribution”, or “none of the above”?   Will I pay higher taxes because I am continuing to receive these non-qualified annuity payments?  (TT asked if I rolled them over to another retirement account or used them for other purchases — a red flag in my book).  

---

Unless box 2a is a lower amount than box 1 then it is probably all taxable.

What code is in box 7?

An inherited annuity is  not eligible to be rolled over - you answer that you did something else with the money.

[greconick]

I received a 1099-R from an inherited Guggenheim annuity.  In contrast to another bank IRA's (and its 1099-R form) which had federal tax  and the RMD removed monthly, this annuity did not have the RMD and was just an investment. The annuity 1099-R lists the gross distribution, the taxable amount, and a 10% federal income tax already withheld. TurboTax is asking the RMD question then is adding the gross distribution as income. I am not sure about how to report information from this 1099-R form as it appears that via this form I paid a minimum 10% federal tax (but no state tax) already?

[DawnC]

Enter the form as you see it.   There was no RMD requirement for 2020.  If you indicated that it was an RMD, you can delete the form and re-enter it and change your answer.   

If you kept the money and did not return it to the account, then the distribution should be adding the gross distribution to income.   The withholding will be a credit on your tax return.   If there was no state withholding, you will owe the amount of tax, if any, on the state return.   

Distributions taken from inherited IRAs are not subject to a 10% early withdrawal penalty in most cases.   You should see only the ordinary income tax on your tax return.    @greconick

[taxigirl]

I totally agree with the response above. I have a short-term period certain annuity not for retirement, but instead to pay for a life insurance policy. It is a non-qualified account. I get an annual distribution to pay for the annual insurance premium. But TurboTax treats it as if it is a typical IRA RMD instead of a purchased commercial annuity.

[Radar67]

This March 2022 and TurboTax isn't just still asking about the RMD for non-qualified annuities but REQUIRES a non-zero answer in box 9a even if the original form has zero. Forcing me to put a value here has future consequences written all over it.  PLEASE  FIX!