*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 2012 and 2013?
What is the contribution deadline for Tax Year 2012?Traditional IRA and Roth IRA contributions received between January 1 and the tax filing deadline may be attributed to tax year 2012. 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 2012 is April 15, 2013.
IRA checks that are received after April 15, 2013, but on or before April 22, 2013 must be accompanied with proof that the check was post-marked to the Agent/Investment Professional on or before April 15, 2012. 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, 2013 will be coded with the 2013 Tax Year.
New contracts must be issued on or before April 15, 2013 for a contribution to be attributed to the 2012 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:
Why did I receive a tax Form 1099-R when I requested a reversal or reinstatement of a withdrawal?Reversals and Reinstatements do not delete tax forms. The tax reporting is not reversed.
1035 Exchanges that are reinstated:
Rollovers/Withdrawals on IRA, SEP, and Roth IRA contracts that are reinstated:
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?Based upon our interpretation of the tax reporting rules for distributions to “non-natural persons,” such as trusts that do not fall subject to Internal Revenue Code section 72(u), we report a distribution code of 1 (premature distribution) on all taxable gain reporting required for distributions from annuity contracts held by these trusts.
Because the trusts are “non-natural persons,” Prudential is unable to validate if a distribution will qualify for the 10% penalty exception. While Prudential reports distributions as subject to the 10% penalty, the trust and/or applicable beneficiaries or trustees may prove an exception to the penalty where appropriate on tax returns via IRS Form 5329. This form can be obtained from the IRS website, www.IRS.gov.
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 3 possible reasons:
For Qualified contracts (except for Qualified Trustee Owned Pension Plans and 457 Plans):
For Roth IRA's we report all distributions as taxable amount not determined.
Why does my Form 1099-R show such a high taxable amount compared to my cost basis?Section 72(e) (11) 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 affects all clients who:
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.
Are there special tax rules that apply to Roth conversions done in 2010?Yes, for individuals who execute a Roth conversion in 2010 (and ONLY for conversions done in 2010) the taxpayer can elect to report the taxable income in 2010 OR report it ratably over the next two tax years. For example, a client converting a $100,000 traditional IRA in 2010 could report the full $100,000 as income in 2010, or report $50,000 as income in 2011, and $50,000 as income in 2012. If the client making the conversion makes a withdrawal from the Roth during those two years, the taxable amount of the conversion will be recognized on an accelerated basis.
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.
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.
0195339-00006-00 Ed. 03/2013
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