Need opinon on Annuity death benefit

[arlo]

Client received statement of survivor annuity paid from death of husband..
Gross distribution $17,724
Taxable Amount Unknown
Box 5 ROTH or Ins. contribution $1454
Box 7 4 Death Benefit
Box 9 b Employee Contribution $28,639
TB Box 9b says after tax contributins so I think this is all taxable. Any help appreciated

[Bees Knees]

You need to read TTB, page 13-20 under the heading: "Cost Basis in a Retirement Plan." If there are after-tax employee contributions, then a portion of each distribution will be non-taxable.

[Gretel]

Client received statement of survivor annuity paid from death of husband..
Gross distribution $17,724
Taxable Amount Unknown
Box 5 ROTH or Ins. contribution $1454
Box 7 4 Death Benefit
Box 9 b Employee Contribution $28,639
TB Box 9b says after tax contributins so I think this is all taxable. Any help appreciated

I am dealing with the same form (if this is from OPR) and here is what I found out:

1. You need to find out if this is a surviver benefit or a death tax benefit - see Pub 721 for different treatment
2. Determine when first payment was made to surviver
3. 9b should make some of the distribution tax free
4. box 5 is probably indication health insurance paid

OPR has a lot of information but hard to find what you need.

I am sure someone will correct me if I am wrong or omitted something important.

[arlo]

Survivor Annuity

I filed prior tax returns for this husband of the client. He was a civilian employee for an air force base here in Illinois.
When he retired he receive a 1099R pension. The 1099R showed the same information in Box 5 and Box 9b but his pension was all taxable. Do you think he might have contributed to a annuity and instead of getting an annual
annuity he died and received this death benefit? Not much up on this stuff. I don't know what you mean by form ORP This from 1099 R from the Office of personnel management OMB

[Burke]

Box 9b indicates employee contributions. Using simplified general rule, a portion of the gross annuity payment should be non-taxable each year until basis is recovered. It seems he should have been writing this off from his date of retirement, and that only a portion should have been taxable. Since the annuity was a survivorship annuity, the remaining basis left at his death cannot be written off at this time. She continues to figure the non-taxable portion under SGR, and any remaining unrecovered basis may be written off at her death.

[Gretel]

I don't know what you mean by form ORP This from 1099 R from the Office of personnel management OMB

Sorry, meant OPM and not OPR but we are both talking about the same thing: Survivor benefit from the Office of Personnel Management.

[Bees Knees]

Box 9b indicates employee contributions. Using simplified general rule, a portion of the gross annuity payment should be non-taxable each year until basis is recovered. It seems he should have been writing this off from his date of retirement, and that only a portion should have been taxable. Since the annuity was a survivorship annuity, the remaining basis left at his death cannot be written off at this time. She continues to figure the non-taxable portion under SGR, and any remaining unrecovered basis may be written off at her death.

It is possible that the cost basis has already been recovered in prior tax years, particularily if he retired more than 20 years ago (someone who retired before 11/19/1996 at age 61 to 65 would have recovered all their cost basis by age 81 to 85). Box 9b will continue to show employee contributions even after the entire cost basis has been recovered.

[Burke]

Good point. If that is the case, there would be no addl basis to recover for the spouse.

[Gary2]

OPM is notorious for reporting UNKNOWN even when they ought to be able to figure it out.

Aside: Technically, it's a CSA-1099R, not that that changes anything.

[arlo]

Post a reply to the thread: Need opinon on Annuity death benefit

What kind of money would you have to spend to learn what is on this board. That is why I read every post
just to see if there might be something new to learn. 77 and still learning

[Burke]

Are you still looking for an answer? You can probably figure out if the deceased has already recovered all of his cost basis by running the worksheet in your software for SGR. You would need to know at what age he retired and began receiving the benefit. You have the contributions amount on the 1099R. Subtract the fixed amount determined by the worksheet for each of the years he received the benefit from retirement age to year of death. If that equals or exceeds the contribution amount on the 1099R, then there is nothing left to recapture, and the full amount of pension is taxable to the spouse. If the total does not equal the contribution amount, then there is still basis left, and she can continue to recapture it until it is gone.

[arlo]

Need opinon on Annuity death benefit

No, I do not need anymore information. I was just complimenting the forum about the wealth of information that is available on this forum. Thanks for the help.