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Taxable amount for Survivor Annuity


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#1 HV Ken

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Posted 02 April 2011 - 02:02 PM

Recently widowed 69yo client (spouse died in 2009) received Survivor Annuity CSF 1099-R for the first time from the Office of Personnel Management.

Box 1: Gross Distribution $8219.00
Box 2a: Taxable Amount UNKNOWN
Box 7: Distribution Code 4 - Death Benefit
Box 9a: Total Employee Contributions $3659


Instructions with the form said to check Pub 721 to determine taxable amount. I confess I am trying to follow this pub, and the instructions have me jumping all over the place. Can someone help break it down into plain English? Is the entire distribution taxable, or can some be recovered? Hopefully I posted enough information for someone to offer some guidance. Thanks!

#2 grandmabee

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Posted 02 April 2011 - 02:23 PM

Recently widowed 69yo client (spouse died in 2009) received Survivor Annuity CSF 1099-R for the first time from the Office of Personnel Management.

Box 1: Gross Distribution $8219.00
Box 2a: Taxable Amount UNKNOWN
Box 7: Distribution Code 4 - Death Benefit
Box 9a: Total Employee Contributions $3659


Instructions with the form said to check Pub 721 to determine taxable amount. I confess I am trying to follow this pub, and the instructions have me jumping all over the place. Can someone help break it down into plain English? Is the entire distribution taxable, or can some be recovered? Hopefully I posted enough information for someone to offer some guidance. Thanks!

doesn't she just continue on with the same rate of exculsion the husband had been using?

#3 HV Ken

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Posted 02 April 2011 - 02:38 PM

doesn't she just continue on with the same rate of exculsion the husband had been using?


His 2007 1099-R had:
Gross Distribution $3861
Taxable Amount: $3731
Distribution Code: 7

His 2008 1099-R had:
Gross Distribution $4284
Taxable Amount: $4142.40
Distribution Code: 7

His 2009 1099-R had:
Gross Distribution $2618
Taxable Amount: UNKNOWN
Distribution Code: 7
Note: Paid to Annuitant Prior to Death
It didn't matter in 2009 how much of the gross was reported as she had no taxable income after standard deduction and exemptions as the return was MFJ.

For 2007 and 2008, the taxable amount was 96.7% of the gross. Are you suggesting to use the same percentage against the 2010 gross distribution?

#4 Hahn1040

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Posted 05 April 2011 - 12:17 AM

It is not a percent of the gross. It is a set monthly amount based on amount employee paid in, age at retirement and the year he retired. Look at the Simplified method. It has changed several times over the years, so the year of retirement is important.

example: if he retired after Nov 18 1996 and before 1998, and he was age 56-60 then you use 310 months
calculate his contribution $3659 divided by 310 months = $11.80 per month x 12 months = $141.60 per year. This amount remains the same until all of his cost has been excluded. If the annuity start date is before 1987 then you continue to take the monthly exclusion even after the cost has been recovered.

For those that retired in the early 1980 they may have used the three year rule in which case there is no exclusion




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