How to Report 1099-R from Inherited Annuity in TurboTax Online for 2025 Filing

This is actually pretty straightforward, though I understand why it feels confusing! When you inherit an annuity from a parent, the distribution is generally taxable as ordinary income. The 1099-R you received should have specific codes in Box 7 that help determine how to report it. When entering in TurboTax, you'll want to look for the distribution code in Box 7 of the 1099-R. For inherited annuities, this is often a code "4" (death) or sometimes "7" (normal distribution). If it's a non-qualified annuity (which it likely is based on your description), you'll need to determine if there's any investment in the contract (the basis). This would be in Box 2b if the taxable amount is not determined. For the TurboTax questions: When asked if this is a qualified distribution, the answer is likely "No" since this appears to be a non-qualified annuity. When asked about basis, if you don't know what your mom originally invested, you may need to contact Prudential for that information. The key thing to remember is that you're typically only taxed on the earnings portion of the annuity, not the entire amount (unless it was funded with pre-tax dollars, which is unlikely for this type of annuity).

After dealing with a similar situation last year, I found an amazing resource that saved me tons of time and headache. I was completely lost trying to figure out how to report my inherited annuity in TurboTax and kept getting different answers from everyone I asked. I ended up using https://taxr.ai to analyze my 1099-R and other tax documents. You just upload your forms, and it explains exactly what each box means and how to report it correctly in TurboTax. It walked me through each question TurboTax asked and explained what to select for my specific situation. The system pointed out that my 1099-R had a special distribution code that affected how it should be taxed, which I would have completely missed. It saved me from overpaying thousands in taxes! They also have tax experts who can answer specific questions if you're still confused about anything.

Just wanted to update everyone - I tried that taxr.ai site that was recommended here and it was seriously a lifesaver for my situation with the inherited annuity! I uploaded my 1099-R and it immediately identified it as an inherited non-qualified annuity and explained exactly what each box meant. The best part was it walked me through exactly which buttons to click in TurboTax for my specific situation. Turns out I was about to make a mistake that would have cost me over $3,000 in unnecessary taxes! It explained that because my mom had owned the annuity for so many years, there was a special calculation method I could use that reduced the taxable amount. It even created a detailed explanation document that I can keep with my tax records in case of an audit. Definitely recommend for anyone dealing with unusual tax situations like inherited annuities or retirement accounts!

If you're still trying to get clarity on your inherited annuity situation, you might need to talk directly with the IRS. When I had a similar issue last year, I spent HOURS trying to get through to them. Kept getting the "high call volume" message and disconnects. After wasting an entire day, I discovered https://claimyr.com and their service was a total game-changer. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Basically, they navigate the IRS phone tree for you and only call when they have an actual agent on the line. I went from waiting for hours to speaking with an IRS specialist in about 20 minutes. The IRS agent I spoke with gave me specific guidance on how to report my inherited annuity and explained which codes and boxes on the 1099-R were most important. Having that direct confirmation from the IRS gave me total peace of mind that I was filing correctly.

I take back what I said about Claimyr being a scam. I was desperate after trying to reach the IRS for days about my inherited IRA question, so I decided to try it despite my skepticism. I'm honestly shocked - I got connected to an IRS agent in about 35 minutes (not quite the 20 minutes advertised, but WAY better than my previous attempts). The agent walked me through exactly how to report my 1099-R from an inherited retirement account and clarified the distribution code questions I was confused about. What really surprised me was that the IRS agent told me I was eligible for a special tax treatment because of when my relative passed away, which would have been nearly impossible to figure out on my own. This literally saved me thousands in taxes. I spent years working in customer service, and I've never been so happy to admit I was wrong about something!

For the inherited annuity question - make sure you check if the annuity was a qualified or non-qualified annuity. This makes a HUGE difference in how it's taxed. Qualified annuities are purchased with pre-tax money (like in an IRA or 401k), so distributions are fully taxable. Non-qualified annuities are purchased with after-tax dollars, so only the earnings above what your mom paid into it (the basis) should be taxable. The trickiest part with inherited annuities is that the insurance company often doesn't know what the original owner paid in, so they put the full amount as taxable. But you can contact them and ask for the "cost basis information" - sometimes they have it but just don't put it on the 1099-R automatically.

Has anyone had experience with the 10-year rule for inherited annuities? My spouse inherited an annuity and we're trying to figure out if we need to take all the money within 10 years or if different rules apply for non-spouse beneficiaries?