My qualified pension plan keeps showing up as an annuity. All info on 1099R form
was posted, but it asks for "cost of annuity". What to do??
Pensions and annuities are taxed in very similar ways, so much so that TurboTax can use the same input screens for both. Don't let the use of the word "annuity" concern you.
The "cost" of an annuity is the amount of after-tax contributions that you made to the pension before you stopped working. This amount forms the "cost" or "basis" of the pension or annuity.
When your pension is paid back out, the portion of the payment that is the return of the cost or basis is non-taxable - because you have already paid tax on it. The whole point of this calculation is to determine how much of the distribution this year is non-taxable.
If you didn't contribute any after-tax money to the pension over the year (many people don't), then just enter zero for the cost.
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