*effective with 2010 tax reporting
Example of 1099-R Form
What does the distribution code on the 1099-R Form mean?
What are the contribution limits for Traditional IRAs and Roth IRAs for Tax Years 2014 and 2015?
What is the contribution deadline for Tax Year 2014?Traditional IRA and Roth IRA contributions received between January 1 and the tax filing deadline may be attributed to tax year 2014. Written instructions indicating attribution to the previous tax year must accompany the contribution, or else the contribution will be attributed to the current tax year. The federal tax filing deadline for Tax Year 2014 is April 15, 2015.
IRA checks that are received after April 15, 2015, but on or before April 22, 2015 must be accompanied with proof that the check was post-marked to the Agent/Financial Professional on or before April 15, 2015. Proof should be a copy or fax of the envelope with the post-mark, or statement of proof of delivery by the USPS or courier service (i.e. UPS or Federal Express); not the actual envelope. Otherwise the contribution will be attributed to the current tax year.
All Tax Year Contributions received after April 22, 2015 will be coded with the 2015 Tax Year.
New contracts must be issued on or before April 15, 2015 for a contribution to be attributed to the 2014 tax year, even if a contribution is made with accompanying attribution instructions prior to the tax filing deadline.
All SEP IRA contributions are coded for the current calendar year, no exceptions.
1099-R Frequently Asked Questions:
If my contract is owned by a trust and is not subject to 72(u), why was the Form 1099-R coded with a 1 in box 7 when I'm over 59 ½?Entity owned contracts, i.e. Trusts are not subject to 72(u) will always use Distribution code 1, as there is no date of birth for an entity, except in the case of a Grantor Trust. Distributions from a Grantor Trust are reported based on the Grantor's date of birth (DOB), and it will be coded as a 1 for an early distribution or as a 7 for normal distribution based on the Grantor's DOB.
Why wasn't my Form 1099-R coded as a disability payment?The withdrawal form did not indicate disability. You can file IRS Form 5329 and would have to prove to the IRS on your own that the disability exception applies.
Why is my entire distribution taxable?For Non-Qualified contracts there are 2 possible reasons:
For Qualified contracts (except for Qualified Trustee Owned Pension Plans and 457 Plans):
Why is box 2b "Taxable amount not determined" checked on my 1099-R?
Why does my Form 1099-R show such a high taxable amount compared to my cost basis?Section 72(e) (12) of the Internal Revenue Code requires that all annuities entered into after October 21, 1988 be aggregated and treated as a single deferred annuity contract for the purpose of determining the amount of taxable gain includible in gross income. Aggregation applies to all contracts:
Why did I receive tax Form 1099-R if I converted my IRA into a Roth IRA?Amounts converted from an eligible IRA to a Roth IRA are required to be included in the customer's taxable income in the year of conversion. Generally, this includes deductible contributions made to the IRA and any earnings on those contributions and the present value of the actuarial benefit if applicable. A Form 1099-R will be issued reflecting the conversion from the traditional to the Roth IRA. The Form 1099-R will reflect a distribution code of either a 2 (under 59 ½ with an exception) or 7 (over 59 ½). In addition, a Form 5498 will be generated to reflect the amounts converted to the Roth IRA.
Why did I receive tax Form 1099-R when I received these funds as a Death Claim?Death claim disbursements from an annuity are taxable events. Under normal circumstances a beneficiary is responsible for the income tax on the death benefit they receive. However, there are exceptions to this general rule as indicated below.
On an annuitant driven contract the death proceeds are payable at the death of the annuitant and are payable to the beneficiary. If the annuitant is the owner, tax reporting is to the beneficiary. If the annuitant and owner are different, tax reporting is to the owner.
On an owner driven contract the proceeds become payable upon death of the owner. For single owned contracts, the proceeds are paid to and reportable to the beneficiary. For Jointly owned contracts, if the surviving owner is not the beneficiary, the surviving owner will receive the tax reporting, however, the beneficiary will receive the proceeds.
On an Entity owned contract the death proceeds are payable at the death of the annuitant and are paid to the beneficiary. The tax reporting is to the owner.
Please be advised that effective for distributions on or after January 1, 2015, the limit of one 60-day IRA to IRA rollover per 12 month period, outlined in IRC Section 408(d)(3)(B), applies on an aggregate basis to all IRAs owned by an individual, regardless of institution. This is based on a Tax Course ruling in Bobrow v. Commisioner, detailed in Announcement 2014-15 by the IRS. This 12 month limit does not apply to IRA to IRA transfers. Please consult your tax advisor.
Tax deferral is provided by IRAs and other qualified retirement plans. A variable annuity contract should be used to fund a qualified retirement plan to benefit from the annuity’s features other than tax deferral, including lifetime income payout option, the death benefit protection, and the ability to transfer among investment options without sales or withdrawal charges.
Conversions to a Roth IRA are generally fully taxable. Before you convert to a Roth IRA, consider how your tax bracket will affect the overall benefit of the rollover. Conversion income may push you into a higher tax bracket. It is, however, possible to convert only part of your traditional IRA. This could enable you to remain in the same tax bracket you would be in without the conversion.
It is generally advisable to pay the taxes on the conversion with funds other than those in your traditional IRA. If you are under age 59½ when you do a conversion, any funds not deposited in the Roth IRA will be subject to the 10% federal income tax penalty (unless an exception applies).
Please note that Prudential does not provide tax or legal advice which clients should obtain from an accountant or attorney. If you have any other questions, please call the Annuity Service Center at 1-888-778-2888. The Service Center is open Monday through Thursday between 8:00 a.m. to 7:00 p.m. and Friday 8:00 a.m. through 6:00 p.m., Eastern Time. Thank you for your loyalty.
0195339-00008-00 Ed. 01/2015
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