Incorrect 1099-r

[rach98n2]

I inherited an account from my mother.  It was not designated an IRA.  I elected to take distribution in 3 equal(ish) withdrawals.  Last year, the 1st withdrawal the amount withdrawn was 23K+ and the taxable was 14k+.  My understanding is that the most taxable funds are distributed first.  This year for the exact same $ withdrawal, the 1099-R has the entire amount taxable.  This can't be right.  In fact before withdrawing last year, the advisor for the firm told me that less than 10k would be taxable on the 2nd withdrawal. I have already argued that the 1099 was coded incorrectly as a D1 and should be a D4. I have received the corrected form showing the D4, but still the same taxable amount.  What do I do?  I have talked to them mult times asking for a review of it.

[LindaS5247 · Accepted solution]

It sounds like this distribution is from a nonqualified plan or some kind of life insurance contract.  Without knowing exactly what type of account this is and how it was set up, it is difficult to determine the taxability.  

I would discuss this with the 1099-R issuer again, or possibly a financial advisor, if you can not get definitive answers from the issuer of the Form 1099-R.

Here is some basic information:

Code D1 indicates a distribution from a nonqualified annuity or life insurance contract and the taxable amount of the distribution is subject to an early-distribution penalty. 

Codes D and 1 together are correct if the contract is considered to be a modified endowment contract.
 

If the distribution code entered is "4B" or "4D", the distribution carries to Form 1040, line 16 as a taxable pension distribution. 

For an inherited retirement account, a Form 1099-R will typically report a "4," in box 7. 

Click here for a description of the distribution codes in Box 7 of Form 1099-R.

People inheriting an annuity owe income tax on the difference between the principal paid into the annuity and the value of the annuity at the annuitant’s death. How taxes are paid on an inherited annuity will depend on the payout structure selected and the status of the beneficiary. 
 

Some basic rules of taxability if you believe this account was an IRA:

Distributions from an inherited traditional IRA are taxable. 

Withdrawals of contributions from an inherited Roth are tax free. Most withdrawals of earnings from an inherited Roth IRA account are also tax-free. However, withdrawals of earnings may be subject to income tax if the Roth account is less than 5-years old at the time of the withdrawal.

Click here for more detailed information regarding Pension and annuity income.

[rach98n2]

Thank you for that detailed description!  In my case, yes, it's an annuity account inherited upon my mother's death (thus the D and 4 codes).  

I truly believe the taxable amount reported is wrong, but I have no way to figure out what it should be.  I have called the company 4 times and gotten different answers every time.  Side note, this happened last year and I received 3 different 1099's all with different numbers, none marked corrected.

What recourse do I have except continuing to badger the company?  I can't get past the 800# answerers to get to someone who actually can deep dive into the account.

[BrittanyS]

If your 1099-R is incorrect and you can not get the payer to issue a corrected 1099-R, you can call the IRS at 1-800-829-1040 for assistance.  However, you need to be able to prove the information is not correct on your 1099-R.  You will need to provide the IRS with the following information:

• Your personal information such as name, address, SSN, 
• Your payer's name, address, and phone number

The IRS will contact the payer and request the corrected form.  The IRS send you a Form 4852, Substitute for Form 1099-R.  

If you do not received the correct information in time to file your return, you may use estimate Form 4852 to complete your return.  Once you receive your correct 1099-R after you file your return, if the information does not match your estimation you can file an amended 1040-X, Amended Return.  

For more information, see the IRS link below:

Form 1099-R not correct or not received

@rach98n2