I have a question about income tax.?

Question

I was under the impression that fixed-rate annuities (non ira)  that I do not take monthly distributions from are not taxable at the end of the year, especially if the taxes have been paid already up front. My non-ira annuities were taxed this year by my preparer.  Is that a correct thing to do?  This was never done in previous years.

? · Accepted Answer

Tax-deferred annuities - as the name suggests - be it fixed, variable, or equity-indexed, accumulate earnings/interest tax-deferred, until withdrawn. If there are no withdrawals, there is no taxable event.

? · Answer

I have not heard of "untaxable" fixed rate annuities.  If your annuity was invested in tax free municipal bonds, then the interest portion would not be taxable.  If you are slowly withdrawing the principle and/or it was in a taxable instrument - taxes would be appropriate.  However, that depends on the annuity.

kelby7670 · Answer

Your annuity is essentially a mutual fund since you are not taking distributions. You would be taxed on the dividends and capital gains earned during the year.

tro · Answer

they would have been reported on a 1099 R and there are codes to determine if it is taxable or not
ask you current preparer why he is claiming this year and not before

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I have a question about income tax.?

4 Answers