If you surrender your annunity and transfer it to an IRA do you have to pay taxes on it?

Question

I had two annunities that were not growing in value like I thought they should. I decided to withdraw all of the money and would like to put it in an IRA. Will I still need to pay taxes on it?

Answer 1

I personally dont think you should. My father has this situation right now and the IRS says it is considered income. They frose his acounts in a heart beat. Their is a court dispute as we speak.

Answer 2

If you are able to roll the annuity money into an IRA, then you will not pay taxes this year on the money.

The real question is, are you allowed to do this? Was the annuity from a "qualified" employer plan, such as a 401k? If so, then you have 60 days from the date of the withdrawal to move the money into an IRA.

If this was a commercial annuity you purchased through an annuity company, you cannot convert this into an IRA. In this case, the part of your annuity withdrawal that was never taxed is going to be taxed in the year you withdraw it. If you have only received the check and have not yet negotiated it, you may be able to endorse it to another annuity company and do a tax-free exchange. This is called a 1035 exchange.

But if you have taken possession of the proceeds of the non-qualified annuity, you have tax to pay.

Answer 3

It may be too late, but you have a certain time to rollover the funds into an IRA without paying taxes. It is much better if the place that will be handling the IRA (mine are at a Credit Union) does the actual transfer without you getting the money in your hands. And you have to be able to show that all the money was put in. If you think you want to keep a few hundred out to use now, it messes everything up and you owe some taxes and have to prove it.

Answer 4

If the annuities were "qualified" annuities, then you have 60 days to roll the money over to an IRA.

Jim Kirby, CPA