Colorado Bankers (CB Life)...
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- 4,576
Depends on what type of annuity each person bought. Did you get a 1099. If Non Qualified, only total deferred interest received since original purchase of original annuity purchased from whatever company should be taxable & interest must be taken out first. Can't sew any way that "the entire amount would be taxable" unless either it is a Traditional IRA or you 1035 exchanged to CBL from previous companies & no cost basis was reported from the prior carrier.
It is a nonqualified annuity and yes, I did receive a 1099. It appears that we are indeed being taxed on the total deferred interest of the CBL annuity and the interest, as you say, came out first when we cashed out the one quarter lump sum that policyholders were offered last Fall. The problem is that we are being taxed on the entire annuity now, even though we only actually received one quarter of it.
- 4,576
Your 1099 was/is accurate as of 12/31, so that is what reported. For most consumers, it will be accurate even after all the dust settles after the Guaranty Association pays the claims up to the insured amounts. Only those in the end that receive back less will have to work with their CPA to try to amend or adjust for whether they ever made any interest, but as of 12/31/23, it was accurate for all if deferred gains distributed were reported as taxable. Same way my own NQ annuity works each year on distributions reported on 1099
Stephen Round
Expert
- 28
Insult to injury...
Just been told by our accountant that we have to pay the government an extra $4,000 when we're actually still out close to 90k of principal. How does that make any sense? Has anyone had any luck going after Citizens Bank for their part in this debacle?
Just been told by our accountant that we have to pay the government an extra $4,000 when we're actually still out close to 90k of principal. How does that make any sense? Has anyone had any luck going after Citizens Bank for their part in this debacle?
- 4,576
This is why I kept telling consumers in this thread to talk to accountant before taking the 25% & to consider a 1035 exchange or rollover of the 25%.Insult to injury...
Just been told by our accountant that we have to pay the government an extra $4,000 when we're actually still out close to 90k of principal. How does that make any sense? Has anyone had any luck going after Citizens Bank for their part in this debacle?
Your tax bill is correct currently as there is no way to know if you will ever be out any Principal as you may be fully covered after it is all done via guaranty association & amount you had in account.
It sucks, but tax wise your 2023 tax notice is like every other citizen that received a distribution from an annuity. IE: taxable gains come out first on NQ annuity before receiving any tax free cost basis.
Is there any way we can defer this for now? Also, wouldn't we have to pay tax on the gains sooner or later anyway? Or would there have been other options if this mess hadn't occur?
- 4,576
not if you already took the distribution & received it. Unlike IRA rollovers where you can physically take possession 1 time per year from all sources & put it back into an IRA within 60 days, Non Qualified Annuity & Life Insurance has no such option. a 1035 exchange must go directly from insurance carrier to insurance carrier to avoid any current tax reporting of deferred gains in the contract.
only option is now to see if you get all your money back after it is done, if that happens, you will have merely settled up now on taxes you would have owed eventually when you took money out or died.
If you get back less in the end because you had more than guaranty assocation, you will have to see if CPA or IRS has some reconcilation to correct that you might not had any gains. I dont know that there is any known information on this because it is so rare that an Annuity carrier failed & it only applies to non-qualified funds as qualified funds are always fuly taxable (Traditional) or tax free(Roth)
- 16,887
Agents always ask me why we can't talk about "State Guarantee Funds" when we sell policies. I'm pretty sure this is a perfect example as to why. They would be describing a much better experience than what people actually have. Plus no state will pay any money to bail out customers of failed insurance companies. It is an agreement between insurance companies to be the back up plan for each other.
It would be nice if the states or even the feds created a REAL backup program like FDIC works for banks. But that would raise the insurance premiums too much I assume.
It would be nice if the states or even the feds created a REAL backup program like FDIC works for banks. But that would raise the insurance premiums too much I assume.
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