topic Reporting distributions from an inherited annuity that has a cost basis in Deductions & credits

Reporting distributions from an inherited annuity that has a cost basis

tax filing — Wed, 05 Mar 2025 20:40:17 GMT

I input my 1099-R distribution from an inherited Non Qualified Annuity and checked the Non Qualified Annuity box. However the following TT questions appear to refer to IRAs and RMDs. Although I have to take $ out each year, I don't believe my distribution is a RMD. Also, unlike 2023, there doesn't appear to be a place to input my cost basis. Am I imputing my annuity in the wrong way?? Many thanks for all your help!!

Re: Reporting distributions from an inherited annuity that has a cost basis

AmyC — Mon, 10 Mar 2025 22:08:27 GMT

1. An inherited nonqualified annuity does not have RMD

2. Cost basis input is determined by your box 2a selection.

3. Let's do it together.

Your 1099R should have box 7 with a code D for nonqualified annuity and code 4 for inherited. Let's go through the steps:

Open your return to the federal income
Select the 1099-R and edit
taxable amount -if box 2a has no amount or needs to be determined, the program will ask about cost basis. If 2a has a number and you select to use it, the program will not ask about the basis.
continue to Enter the form,
No Public Safety Officer
Age of person - before of after Jan 1, 1952.
select no or yes
select 403b plan
RMD, enter zero
continue

Reference: Publication 575 (2023), Pension and Annuity Income states regarding RMD:

For this purpose, a qualified retirement plan includes:

A qualified employee plan,

A qualified employee annuity plan,

An eligible section 457 deferred compensation plan, or

A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986).

Reduced tax rate for excess accumulations.

The additional tax rate for distributions that are less than the RMD amount (excess accumulations) is reduced to 25% for tax years beginning in 2023 and after.

Re: Reporting distributions from an inherited annuity that has a cost basis

tax filing — Sat, 15 Mar 2025 15:19:28 GMT

Hello Amy C,

While I've always gotten good advice from the TT community, I believe this is the best, most comprehensive and helpful reply I have ever gotten!!! Thanks so much for taking the time to walk me step by step through the process and explain why in the case of cost basis, I may or may not be asked to input. I certainly appreciate your efforts to directly address each of my questions and provided needed guidance. Even the way you responded e.g. "Lets walk through this together" made me feel like you were sitting across the table from me helping me with my taxes!! Many, many thanks.