Inherited Annuity

[dav_smith]

My father passed away and I am not seeing where I note the 1099-R for the federal income tax, since this is a death and it is a payout from a Life Insurance I do not see where I put this information in my return?

There is no state tax, but I am not sure how to do federal, this came with a 1099-R but it is from the life insurance company.

Any info would be appreciated.

Thanks

[ColeenD3 · Accepted solution]

You'll get a 1099-R if you received $10 or more from a retirement plan. Code 4  will indicate that it was due to death. 

Here's how to enter your 1099-R in TurboTax:

1. Open (continue) return if you don't already have it open.
2. Inside TurboTax, search for 1099-R and select the Jump to link in the search results.
3. Answer Yes on the Your 1099-R screen, then select Continue.
   • If you land on the Your 1099-R Entries screen instead, select Add Another 1099-R.
4. Select how you want to enter your 1099-R (import or type it in yourself) and then follow the instructions. You can add up to 20 1099-Rs.

[maytonh]

I have a similar situation.  My wife inherited the remainder of her mother's annuity at her death.  The distribution in full came to her as a lump sum.  I have the 1099-R and have entered the info in Turbotax.  Turbotax keeps referring to this as "SPOUSE'S IRA"  or "Inherited IRA."  Does it matter that this was an annuity payout?  Are they treated the same anyway?  Thanks

Harold

[JamesG1]

Your wife inherited her mother’s annuity. 

It sounds like she received the remaining balance so the 1099-R is probably marked as:

• ‘total distribution’ in box 2b, and
• ‘4’ in box 7.

You do want to indicate that it is an ‘inherited IRA’ but it is not a ‘spousal IRA’.  See this help.

[ddemarino]

So both my mom and I inherited separate annuity accounts from my dad's death (life insurance policies that were annuity accounts).    My mom cashed hers out completely and they withheld the 10% for taxes.  I'm now trying to do her taxes on turbo tax and it's saying that she owes ANOTHER 10% Federal and half that amount to state.  So a total of 20% for Federal.  Is this accurate?   

[ThomasM125]

@ddemarino The federal tax on the distribution would be at her marginal tax rate, which could be 10%, 12%, 22%, 24% or more. It would depend on her taxable income.

The 10% withholding is just the minimal amount that may apply, but the actual tax is often much more.

[ddemarino]

wow.  that's a lot since that is her only income other than social security.   I'm fearful for mine now since they didn't get around to cutting my check I requested in December until January so it's hitting this year's taxes instead of last year's.  

[jtax]

If you tell us (roughly) the amount of the 1099-R distribution and the amount of SS benefits we cant double check for you. But the basic tax formula in that case would be something like this (assuming no special deductions, no other income, and that your mother is single and over 65).

1099-R amount + 85% of SS benefits - standard deduction ($12,400 + $1,300 if over 65).

85% if the max % of SS that is taxed (if one is single and have more than $34,000 in other income).

So not only is the pension taxed but social security it likely being partially taxed as well. Sometimes take such payments over time. But maybe not. It's a complicated decision.

Then apply the tax rates below to it. 

Tax rate	Taxable income bracket	Tax owed
10%	$0 to $9,875	10% of taxable income
12%	$9,876 to $40,125	$987.50 plus 12% of the amount over $9,875
22%	$40,126 to $85,525	$4,617.50 plus 22% of the amount over $40,125
24%	$85,526 to $163,300	$14,605.50 plus 24% of the amount over $85,525
32%	$163,301 to $207,350	$33,271.50 plus 32% of the amount over $163,300
35%	$207,351 to $518,400	$47,367.50 plus 35% of the amount over $207,350
37%	$518,401 or more	$156,235 plus 37% of the amount over $518,400

from https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets