I inherited a nonqualified annuity from my father in 2022 who inherited from his wife/my mom. The company sent me $11,500 in 2023 which was the employee contribution amount. I received a 1099-R in 2023 with $56,731.90 in box 1 (Gross Distribution), $45,231.90 in box 2a (Taxable Amount), and $11,500 in box 5 Employee Contribution/Roth Contribution or Insurance Premiums). When entering the 1099-R in TurboTax the taxable amount on the 1040 is $45,231.90 but I only received $11,500.00. Is the 1099-R incorrect?
For a distribution from an nonqualified annuity paid to a beneficiary, the codes in box 7 would be 4 and D.
The Form 1099-R says that you were paid $56,731.90, so the question is where did the $45,231.90 go? It seems unlikely that there would have been a $45,231.90 loan from the plan that was paid off with an offset, so based on the Form 1099-R the $45,231.90 must have gone somewhere for your benefit and is taxable income. The tax code does not permit the entire $11,500 of investment in the contract to be paid out without also having paid out the $45,231.90 to you. Rollover of the $45,231.90 shown on this form was not permitted, so it can't be in a retirement account. It seems that the amount you actually received would have been the entire $56,731.90 and there is no good reason that this would have been provided as a payment separate from the $11,500. (Although doubtful, if somehow under the terms of the annuity you were only eligible to be paid the investment in the contract, the Form 1099-R is wrong.)
@VogtAl it probably won't matter but what is the code in Box 7?
have you contacted the Administrator of the Annuity to get an explanation? I would start there.
For a distribution from an nonqualified annuity paid to a beneficiary, the codes in box 7 would be 4 and D.
The Form 1099-R says that you were paid $56,731.90, so the question is where did the $45,231.90 go? It seems unlikely that there would have been a $45,231.90 loan from the plan that was paid off with an offset, so based on the Form 1099-R the $45,231.90 must have gone somewhere for your benefit and is taxable income. The tax code does not permit the entire $11,500 of investment in the contract to be paid out without also having paid out the $45,231.90 to you. Rollover of the $45,231.90 shown on this form was not permitted, so it can't be in a retirement account. It seems that the amount you actually received would have been the entire $56,731.90 and there is no good reason that this would have been provided as a payment separate from the $11,500. (Although doubtful, if somehow under the terms of the annuity you were only eligible to be paid the investment in the contract, the Form 1099-R is wrong.)