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Tax Question. 1099-R Box 1 shows an amount, Box 2 nothing…

Tax Question. 1099-R Box 1 shows...
Tax Question.
1099-R Box 1 shows an amount, Box 2 nothing with taxable amount not determine box checked. Box 5 has an amount. How do I determine the taxable amount? Do I subtract box 5 from box 1? There's also an amount in 9b.
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Answered in 9 minutes by:
3/19/2018
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,595
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

What is the 1099R for? Annuity or pension? Generally the difference between box 1 and box 5 is your taxable income and the amount in box 9b shows your remaining basis.

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Customer reply replied 1 month ago
It says "statement of survivor annuity paid
Customer reply replied 1 month ago
does it matter whether it is an annuity or pension?
Customer reply replied 1 month ago
Here's a redacted copy

Sometimes. If it is a state pension (government pension) there's usually a percentage by which you can reduce your total distribution. But if it is an annuity, taxable income is determined by your age. Your investment company already figured it out for you.

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Customer reply replied 1 month ago
I'm confused. If the investment company already determined this, is it still going to be by the formula box 1 minus box 5 for the taxable amount? I see that the prior year as a percent the taxable amount is much lower on the return than what I'm calculating.

Investment company already gave you the basis included in box 1. That's the amount in box 5. For an annuity the percentage will not be same every year, it depends how well the investment is doing.

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Customer reply replied 1 month ago
at the end of the day the taxable amount is going to be box 1 less box 5?

Correct.

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Customer reply replied 1 month ago
Is there any good, IRS reference that goes over this?

Publication 575 is about pension and annuities but it will not give you specific instructions how to calculate your taxable income.

https://www.irs.gov/publications/p575

Your annuity was funded with after tax funds that created basis. Depending on the condition of the annuity, with every distribution you receive some earnings and some basis. The basis are generally listed in box 5, total lifetime basis are in box 9b.

Your taxable portion is the gross distribution reduced by the basis (box 1 - box 5).

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Customer reply replied 1 month ago
Why don't they just list box 2 with the taxable amount? Why do they make this so confusing?

I do not have answer for that but my guess is that if the investment company generates hundreds of 1099R they do not want to "customize" each one. They basically provides you with the information and leave it to you to figure out taxable portion.

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Customer reply replied 1 month ago
Got it. Even though the IRS doesn't have any descriptions on this, are there any good articles you can find as references for this calc?

There are several very good tax guides like EY Tax guide, US master tax guide or J. K. Lasser's Income tax guide (the one I am using), unfortunately they are not available online. You can get an online access when you buy the book.

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Another good source are NOLO books. They have some articles available online but for most you will have to purchase their books.

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Customer reply replied 1 month ago
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