Annuity Tax Forms for Qualified and Non-Qualified Income Annuities

• For a qualified immediate Annuity, QLAC, or qualified longevity annuity you will receive form 1099R on January 31st and form 5498 on May 31st
• For a non-qualified immediate annuity or non-qualified longevity annuity you will receive form 1099R on January 31st
• For a QLAC or qualified longevity annuity that was purchased in the same tax year you will receive form 5498 on May 31st

An income annuity can be purchased with pre-tax money (qualified annuities) or post-tax money (non-qualified annuities). While you don’t pay taxes on your income annuity during the deferral period, qualified and non-qualified annuities have different tax treatment, which affects the income payments and annuity tax forms you receive.

While the income payments you receive from a qualified annuity are fully taxable at regular income rates, your retirement income generated by a non-qualified annuity will not be 100% taxable. Each income payment can be split into two pieces: a part that’s returning your premium, and any amount above that which reflects your gain or profit. Taxes will only be owed on the gain, as the premium you invested in the contract has already been taxed.

Because of this differing tax treatment, once your retirement income has begun you will receive different tax forms reporting the amount of income generated from your non-qualified or qualified annuity.

We’ve laid out how to best address administrative tax requirements and forms for current (or those considering to be) purchasers of qualified and non-qualified annuity products. 

1. Annuity Tax Forms for a Qualified Immediate Annuity, QLAC, or Qualified Longevity Annuity 

If you are receiving annuity payments you will receive form 1099R by January 31st. The 1099R is used to report the amount of taxable income you received from your annuity in the last calendar year. 

Some of the items included on the form are gross distributions paid during the given tax year, the amount of the distribution that is taxable, the federal income tax that has been withheld at source, if any, the contributions made to the investment or premiums paid, and a code that represents the type of distributions made to the holder of the plan.

You will also receive form 5498 by May 31st. The 5498 is a tax form that is required to be filed by the insurance company. This form will arrive after the tax filing deadline and does not need to be included on your taxes. It is prudent to give this to your tax preparer for the next calendar year. The 5498 includes a fair market value that the insurer is required to report to the IRS. This fair market value does not have any bearing on your policy or payments.

2. Annuity Tax Forms for a Non-Qualified Immediate Annuity or Non-Qualified Longevity Annuity

If you are receiving annuity payments you will receive form 1099R by January 31st. The 1099R is used to report the amount of taxable income you received from your annuity in the last calendar year. 

Some of the items included on the form are gross distributions paid during the given tax year, the amount of the distribution that is taxable, the federal income tax that has been withheld at source, if any, the contributions made to the investment or premiums paid, and a code that represents the type of distributions made to the holder of the plan.

3. Annuity Tax Forms for a QLAC or Qualified Longevity Annuity That Was Purchased In the Same Year

You will receive form 5498 on May 31st. The 5498 is a tax form that is required to be filed by the insurance company. This form will arrive after the tax filing deadline and does not need to be included on your taxes. It is prudent to give this to your tax preparer for the next calendar year. The 5498 includes a fair market value that the insurer is required to report to the IRS. This fair market value does not have any bearing on your policy or payments.

4. Annuity Tax Forms for a Non-Qualified or Qualified Longevity Income Annuity That Was Purchased In the Tax Year

You will receive form 1098Q on January 31st. The 1098 will report to the IRS that you purchased a product that will pay you in the future with funds in the previous tax year. The 1098Q will report the purchase of products to the IRS, which will pay you in the future with premiums you deposited in the tax year under consideration.

This form would have been completed by your insurance provider/custodian and has no bearing on your current year taxes.  You will not need to do anything with this form for current year taxes although it is prudent to provide it to your tax advisor, if you have one.

How to Report Annuity Income from Your 1099R on Your 1040 Tax Return

If you drew any income from annuities during the tax year under consideration, it goes on line 16 of Form 1040. The Forms 1099-R described above (without a check in the IRA box) reports distributions from pensions and annuities. This is the information that goes on line 16.

Line 16 is further broken down into two categories. The space next to 16a reports the gross amount of distributions you received from pensions and annuities. Line 16b reports the taxable portion of these distributions.

You will also have to report this information from Form 1099-R on your state tax return.

All of this is shown in the worksheet below:

Although this is a comprehensive overview, we suggest you talk to your tax advisor to get all the details on your annuity. Blueprint Income is not a fiduciary, but we adhere to fiduciary principles when recommending annuities.

Disclaimer: This article is provided for informational purposes only and not for the purpose of sales, solicitation or inducement to purchase any annuity product.  Blueprint Income is not responsible for the accuracy of this information. If you wish to confirm the information contained herein, prior to making an annuity purchase, please consult with your tax advisor.