How to Record Proceeds from Annuity Inheritance

Birdman24

As a beneficiary to an annuity, I elected to receive the annuity benefits as a lump sump payment.  Thus, I have received a payment from the company consisting of TP (Total Proceeds) which includes NTI (Non-taxable income); TI (Taxable income) and II (Interest income from death of owner to payment).  Now that I have deposited the check in my checking account, how to I record the various portions of the payment to the correct tax category?

Frankx

Hi again @Birdman24

Yes, I agree that you'll need to wait for the 1099 and potentially related information to get more accurate information for Quicken (as well as for your tax return prep.

That being said, here's how I suggest that you record the components you mentioned above:

"NTI" likely represents the fair value of the annuity at date of death (DOD).  That is effectively a non-taxable (for US income tax purposes) gift, which you should record in Quicken in a non-taxable personal income category. "Gift Received" is the category I would suggest.

"II" likely is the interest income that was accrued after the donor's death up to the date of the payment check.  That should be recorded to the "Interest Income" category.

I may have misunderstood whether there was any amount allocated to "TI".  I would have assumed that this should be zero, but is there is an amount in that category I would suggest that you record it as "Other Income" at least for now.

Let me know if you have any followups.

Frankx

Frankx

Hi @Birdman24

Can you tell me whether there is any additional information provided about the "TI" portion?  Also, did you happen to receive a form 1099 from the annuity company? If so, can you tell me:

• The type of 1099 that you received (what appears after "1099-" ) possible options include 1099-INT, 1099-DIV, etc..
• The data (including box numbers) on the form.

Get back to me and we'll go from there.

Frankx  

Birdman24

Frankx - Thanks for the follow-up.  No, I haven't received a 1099 for the distribution yet. The statement included with the payment showed:

Taxable amount
Pre-TEFRA Basis Amount was $0.00)
Pre-TEFRA Interest Amount (was $0.00)
Post-TEFRA Basis Amount
Post-TEFRA Interest Amount (same as "Taxable amount" above)

Also of note, is the Post-TEFRA Interest Amount includes the amount that I initially described as II (Interest income from date of death to distribution).

Might have to wait for 1099 to accurately enter information, but was just trying to get initial info for tax planning purposes.

Thanks for your help and any suggestions.

Frankx

Hi again @Birdman24

Yes, I agree that you'll need to wait for the 1099 and potentially related information to get more accurate information for Quicken (as well as for your tax return prep.

That being said, here's how I suggest that you record the components you mentioned above:

"NTI" likely represents the fair value of the annuity at date of death (DOD).  That is effectively a non-taxable (for US income tax purposes) gift, which you should record in Quicken in a non-taxable personal income category. "Gift Received" is the category I would suggest.

"II" likely is the interest income that was accrued after the donor's death up to the date of the payment check.  That should be recorded to the "Interest Income" category.

I may have misunderstood whether there was any amount allocated to "TI".  I would have assumed that this should be zero, but is there is an amount in that category I would suggest that you record it as "Other Income" at least for now.

Let me know if you have any followups.

Frankx

Birdman24

Thank you for your input.  Great idea to record the non-taxable portion of the distribution as a gift.  This would allow for accurate reporting for purposes of tax planning.

Have a great day and stay safe!