Form CSA 1099-R / Statement of Annuity Paid

[taxmcp]

I have a new client to me this year who has a Form CSA 1099-R with Gross Distributions = 34044 in Box 1, a Taxable amount = 33854.64 in Box 2a, a Distribution Code 7-NONDISABILITY in Box 7, and a Total Employee Contributions = 4891.00 in Box 9b. This client is my first client with a distribution from an annuity and I have never prepared tax returns for which I had to calculate the taxable amount using the Simplified Method or the General Rule. Am I correct that because my client's Form CSA 1099R has a Taxable amount in Box 2a that I don't need to input any information in the fields under Annuities tab in ProConnect Tax Online that wants me to enter the following information in the Simplified Method section:

• Cost in plan at annuity starting date (plus death benefit exclusion)
• Annuity starting date
• Age at annuity starting date
• Combined ages at annuity starting date
• Amount recovered tax free after 1986

or to enter the following information in the General Rule section:

• Annuity starting date
• Investment in contract (plus death benefit exclusion)
• Expected return
• Investment previously recovered tax free
• Initial monthly annuity, if different
• Annuity ending date (final year only), if applicable.

all information I don't have, but that I only need to complete the Payer Information section and enter boxes 1-11 as they appear on the Form CSA 1099-R received from the Income submenu, Pensions, IRAs (1099-R) in ProConnect Tax Online the same as I would complete for any Form 1099-R?

[rbynaker]

Pub 721 is your go-to for this stuff.

You can short-cut this if you have a taxable amount but I don't recommend it. I find it's useful to keep track of the unrecovered basis in the annuity. The non-taxable amount will be the same every year (difference between box 1 and box 2a). That is the amount recovered each year out of the 9b total employee contributions. If/when this turns into a survivor annuity the spouse "steps into the shoes" of the deceased and continues to recover the original basis at the same rate until it is all used up. So it's potentially useful information later. I also include the Simplified Method worksheet (prepared by my tax software) as part of the client copy of the return so anyone who needs this info in the future will have access to it.

If your client doesn't remember the annuity start date you can narrow it down by reversing the math. For example, if the tax-free amount is ~$2,900/year and the original contributions were $74,907 then I know it was spread over a 310 month period which puts combined ages in the 121-130 year range (Pub 721 page 28). If my taxpayers are the same age, they would have been 60-65 when they retired.

Rick

[rbynaker]

PS: The box 5 amount on these represents after-tax health insurance and would be deductible on Sch A if your client itemizes (and has >7.5% AGI in medical expenses). There is also an annual "Notice of Annuity Adjustment" (sometimes more than one) that will give you good details on various withholding (hint: also look for LTC premiums which might give you a state tax benefit). I always have my CSA/CSF clients save the adjustment notice(s) each year for me.

[rbynaker]

Just saw your post in the ProSeries community. For that small of an amount of employee contributions (<$5K), I wouldn't spend any extra time on this.