RMD's & Annuities

[harley990211]

I have an annuity that was designated a IRA .  It was purchased in one lump sum and using after tax dollars.  For 3 years now, I am in a payout phase.   Income is reported on 1040 Line 5A.   Over the years I have been making 'non-deductible' contributions to 'traditional IRA's and reporting the amount on Form 8606.

Question is now that I am 72, and subject to RMD's, how does the annuity payout dealt with in reference to Form 8606 when I am reporting RMD's distributions starting in 2022 tax year.  The adviser on the annuity says the payout counts towards the RMD's overall.  But Line 7 of 8606 says to report distributions from all traditional IRA's etc.   The purchase of the annuity was never added to the total on the 8606 as it was not an IRA in my eyes.

Hopefully you understand the question.

One other related question.  May I still put money into an IRA that is NOT deductible since I do not have any earned income?  Thanks

[KeithS01]

Hi, @harley990211.

Let's take the easier question first. The amount you can contribute to an IRA (regardless of deductibility) is limited by your earned income. So, no, you can not contribute to an IRA if you have no earned income.

I don't understand what you mean by "designated a IRA". You either held the annuity inside of an IRA, or you didn't. The payouts can only "count towards your RMD" if they are from an IRA. If you used non-deductible IRA contributions to purchase the annuity, then all of the payouts from it should be going through the 8606, even if they aren't RMDs.

[harley990211]

Not sure why you do not understand 'designating' something an IRA.  It is done all the time.  You can designate savings acct an IRA or an acct with gold coins in it as an IRA.  The 1099 I received says box 7 is  marked 7 - a normal distribution.  What does normal mean?

[KeithS01]

Normal, in this sense, generally means that it was originally your money, is in a traditional IRA, and that you are over 59-1/2 years old. It is the typical, expected, course of distribution for an IRA.

It is not, for example, an early distribution, an inherited IRA, a Roth IRA, or any of the 29 reasons money could be (deemed to be) distributed from an IRA.