I have a Federal Survivor annuity and all of it should be non-taxable because of I am recovering the cost of the annuity. 2019 Turbo tax shows it taxable. How do I make it untaxable?

[DianeC958]

On the 1099-R you received there should be an amount in box 5 for the amount of your contributions.  When you receive payments from the annuity part of it is taxable, for the growth of the money, and part of it is not.

When the program asks you if the amount in Box 2 is the taxable amount answer No.

Then the program will ask you a series of questions about the annuity and when it started and other information so it can calculate the amount that is taxable.

[PLow]

This is a survivor annuity from a federal annuity. The program doesn't ask if the number in box 2 is taxable. It only says to put in the number that is in Box 2a of the 1099R.  There is no number in Box 2a, it just says UNKNOWN.  I know that it is zero, so I put in zero. It is zero because I haven't recovered the Total Employee Contributions (and I know it uses the Simple method). The 1099-R summary worksheet, line 26 shows the taxable amount from 1099-R box 2a to be the gross distribution, not the taxable amount that I put in, which is zero. 

1099-R summary worksheet, line 29 show the non-taxable amount to be zero, but it should be the full gross distribution. 

The numbers from the 1099-R worksheet are then transferred to the 1040, and the are incorrect.

[ColeenD3]

You should never put a zero in Box 2a when it is blank. You should never alter a reporting document. When you enter that the taxable amount is unknown, the program takes you through a series of questions. As mentioned above, the Box 5 amount is the amount of contributions. A portion of that amount would have been taken each year with each distribution.

[ACnVA]

Box 2a taxable amount box has the words "unknown" typed in there.  So do you just leave it blank?  There is no box 2b on the form at all.  So I don't think it is applicable to use 2b check boxes for "taxable amount unknown" since that 2b is not on the 1099-R.  This is a survivor annuity and nothing is in box  for distribution.  Is this amount taxable? 

[DianeC958]

Yes, you would leave box 2b blank if you are recovering amounts that were contributed with after tax dollars.  

Do not check the box for Taxable Amount Unknown, the program will then tax the full amount.

The amount that is not taxable are any contributions made the account with after tax dollars.

If it is a qualified annuity then it was funded with before tax dollars.  This means that when you take money out of the annuity the full amount is taxable.

@ACnVA