Nonqualified annuity prior to 1982

[123amf2978]

I have inherited an annuity that was purchased in 1981 under the FIFO method for distributions.  How do I enter through Turbo Tax .... the step-by-step questions force me to choose between the Simplified or General method for determining the taxable portion.  The FIFO method does not apply to the General method.  This is a non-qualified annuity.

[ColeenD3]

You are correct. Non-qualified plans are required to use the General Rule.

The General Rule

If you receive annuity payments from a nonqualified retirement plan, you must use the General Rule. Under the General Rule, you figure the taxable and tax-free parts of your annuity payments using life expectancy tables that the IRS issues. For a fee, the IRS will figure the tax-free part of your annuity payments for you. For more information, refer to Publication 939, General Rule for Pensions and Annuities.

[BeenDownThat Road]

Please don't give wrong advice.

A non-qualified annuity bought with a single premium payment in 1981 is grandfathered under the old IRS rules regarding distributions. Prior to 1982, first distributions were treated using the FIFO method and the paid premium portion of the distribution was treated as tax free.

In this case, the General Rule does NOT apply to this non-qualified annuity bought in 1981.

[dmertz]

In TurboTax you must select the General Rule to allow entry of any self-calculated taxable amount when the payer has not provided a taxable amount in box 2a, even though the calculation of an exclusion percentage under the General Rule does not apply.  When you select the General Rule, TurboTax simply places in box 2a whatever amount you enter as the taxable amount.