Julian wrote:
- quote -

(balance snipped....)

the very first thing you should do is to contact the payor to confirm
that it doesn't know what it's doing. The payor should have already
calculated the gross amount and taxable amount, and different figures
should show in those two different boxes on the 1099R.

Have you contacted them already? And if so, what did they say?

ChEAr$,
Harlan Lunsford, EA n LA

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I have 3 annuity non-qualified contracts which I bought in 2004. I was
61 years old at that time. These are referred to as "safe money"
contracts. They pay equal monthly installments for 14 years based upon
what I paid, and I can never get less than I put in, although if stock
market/value of contracts increases sufficiently in 5 years from the
date of purchase I could re-up for another 14 years without adding
additional money. [I have to pay a 1/2 point for this insuarnce
feature].

Last year i learned that I could recover a prorata portion of my
investment as a tax free prorata return of my investment, referred to
as an exclusion. I was unaware of this before because the 1099r didnt
check off that the taxable amount was unknown and checked that the
amount paid was the amount taxable. However , I confirmed from three
separate accountants and some research that a part of what i paid in
was indeed excludable, as I was in the amortization phase of the
contract, not the accumulation phase.
I use a software program to do my taxes.

this year I thought i would check the irs instructions and they advise
in the 1040 instructions to use the simplified mehtod in the
worksheet. However Pub 939 suggests to use the general method.

In any case, using the worksheet at page 23 of the 1040 instructions
gave me a larger taxable amount of the distribution than using the
computer software program . I think this may be because in calculating
the excludeable amount of the distribution the 1040 uses the total
number of months of life expectancy--, 260--months from the time i was
61 when i bought the contract, although i think i started receiving
distibutions in 2006..possibly 2005. [the number to divide into the
total cost is still 260 months , whether I was 61 or 63].

Because i can never exclude in total more than i paid for each
contract whichever method or worksheet i use, should i switch to the
worksheet in the 1040 instructions to calculate taxable income or stay
with the software program's mehtod??

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >