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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I had money in an annuity which was subsequently stolen by

Customer Question

I had money in an annuity which was subsequently stolen by my financial advisor. The bank in question informed me of this theft and has reimbursed the money that was taken. My question is how to report this on my income tax. Do I report the theft as a loss and then the reimbursement of my funds as income or do I report only the amount of interest that was given to me in the settlement? The money I received in the settlement was my money except for $2000.00 in interest and I have already paid taxes in 2005 on $10,000 of it. The total amount taken from my account was $22,000. I would appreciate any information you can give me regarding where to find the answer for these questions.
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.

Since the annuity was lost but has been reimbursed by the bank there is no theft to report. Hence, you would only report the reimbursement of excess money over your basis as income from annuities.

 

Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%. This tax applies to the part of the distribution that you must include in gross income. It does not apply to any part of a distribution that is tax free, such as amounts that represent a return of your cost or that were rolled over to another retirement plan.

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

RD and other Tax Specialists are ready to help you
Customer: replied 6 years ago.
So, if I am understanding correctly, I only will need to report the interest that was paid and not the entire amount that was returned to me. Is that correct? My husband also had money stolen from his account and that was also returned to him. A much smaller amount was taken from his account than from mine, so his interest was much smaller.
Do we report each one separately - the settlements were made individually to us.

Thank you so much for your help. If I have further questions in the future may I contact you again?
Expert:  RD replied 6 years ago.

Yes, you will report the income from the annuity that is in excess of the money that you invested. It is advisable to report this amount separately.

Is the bank going to issue you a Form 1099R?

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.