Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
koby3333
New Member

I have a capital loss in an annuity and it is not showing up on my tax return. I have entered the data from my 1099R. What else do I need to do?

 
6 Replies
MichaelDC
New Member

I have a capital loss in an annuity and it is not showing up on my tax return. I have entered the data from my 1099R. What else do I need to do?

If you have a loss on the surrender of a non-qualified annuity, there is no tax deduction for it, but there would be no income tax on the distribution either; the information TurboTax would need to calculate this would be included on the 1099-R.  For example look here:   http://www.irs.gov/pub/irs-prior/f1099r--2016.pdf

Non-qualified annuities give a nice tax benefit in that tax is deferred inside them as value grows above cost basis, but when distributed, the gain is taxed first at ordinary income tax rates, not capital gains. You may not take a capital loss as you do with a stock sale.

However, if you only took a partial distribution (not a full surrender), and there is gain inside the contract, you will pay tax on the gain first.  This is called LIFO taxation (last in, first out).  See this link for a quick explanation: http://en.wikipedia.org/wiki/FIFO_and_LIFO_accounting

So for instance if you had non-qualified annuity which you had purchased for $50,000 and you took a partial surrender of $10,000 when the value was $55,000, you would pay tax on $5,000, and the other $5,000 would be a return of basis and therefore be tax free.  (This does not assume any contract surrender charges).  The cost basis would then be $45,000 for future distributions. 

In the same situation if there was a distribution when the value was only $45,000 after purchase for $50,000, then there would be no tax since there is no gain in the contract at that time.  The cost basis would be decreased by the amount of the distribution. 

Therefore, if your 1099-R shows that the distribution was less than the cost basis, you will not have to pay any tax unless there is gain in the contract

Also, many people are not aware that non-qualified annuities have an age requirement of 59 ½ like IRAs for distributions to be made without early withdrawal tax penalties. 

See this link for helpful information: http://wiki.fool.com/Taxation_of_Non-Qualified_Annuities


Liang123
Returning Member

I have a capital loss in an annuity and it is not showing up on my tax return. I have entered the data from my 1099R. What else do I need to do?

tI entered the distribution value of 22,000 and the contribution of 25,000 as indicated on 1099R, but Turbo Tax included the 22,000 as part of the income?  How should I do next ? 

Liang123
Returning Member

I have a capital loss in an annuity and it is not showing up on my tax return. I have entered the data from my 1099R. What else do I need to do?

Additional question:

This is a lost, where do I enter the loss amount?

  

Liang123
Returning Member

I have a capital loss in an annuity and it is not showing up on my tax return. I have entered the data from my 1099R. What else do I need to do?

Sorry, typo ... should be 'loss' not lost

GeorgeM777
Expert Alumni

I have a capital loss in an annuity and it is not showing up on my tax return. I have entered the data from my 1099R. What else do I need to do?

Not sure why your 1099-R income has been included in your taxable income.  What codes are in Box 7 on your 1099-R?  It could be that your distribution is showing as taxable because the codes in Box 7 reflect that the distribution is not qualified.   Moreover, it's possible that your 1099-R does not have the correct codes.  Therefore, follow-up with additional information as necessary and let us know the type of account you have, i.e., traditional IRA, Roth IRA, 401(k), pension, etc.  Additionally, how long have you held the account, and your age.  As a reminder, if you do post additional information, do not include personal identifiable information.   

 

Generally, investment losses in retirement accounts are not deductible.  In other words, you cannot reduce your income by the loss you realized.  The result would be different if the annuity (or other investment) was in a non-retirement type account.  In that circumstance, you would be able to claim the loss.  

 

@Liang123

 

 

Liang123
Returning Member

I have a capital loss in an annuity and it is not showing up on my tax return. I have entered the data from my 1099R. What else do I need to do?

This 1099-R was issued for a  Life  Annuity policy taken out in 2011 and full surrender in 2021.  Line 1 Gross Distribution has an amount, however  Line 2a was blank .  When Line 2a is blank the default value is taken from Line 1 and counted as 'income'.  I called the Life Insurance Company and have them re-issued a corrected 1099-R with the Line 2a Taxable Amount as  zero instead of 'blank'. This resolved my issue and continued with Turbo Tax  to complete my tax return. 

Dynamic AdsDynamic Ads
Privacy Settings
v