Management Fees Paid Directly from a Non-Qualified Tax Deferred Annuity:
Taxpayer has a commercial non-qualified annuity. The RIA is paid directly from the NQA. At the end of the year, insurance company issues a 1099R for the management fees management fees paid directly. I have seen literature indicating that the IRS has not ruled on this issue and suggests that you can either deduct on Schedule A as a miscellaneous deduction subject to 2% (and AMT) or consider reporting as not taxable on face of 1040, line 16b with a footnote explaining this was a management fee. What are your thoughts on the reducing the taxable portion on face of return?
Permalink Submitted by Alan - IRA critic on Fri, 2016-11-11 02:23
Here is an article that conforms to your findings. It appears that the more aggressive treatment of not reporting the 1099R income may or may not be challenged by the IRS. It may be worth a try since in most cases the misc deduction will be erased by the 2% AGI floor. But I couldn’t speculate on the chances that this treatment would not be challenged.http://www.clientfirstria.com/Content/files/NEWCFIMIRSManagementFeeInfo.pdf
Permalink Submitted by David Huntoon on Sat, 2016-11-12 17:02
Thank you! I did not see an attached article, but appreciate your confirmation
Permalink Submitted by Alan - IRA critic on Sat, 2016-11-12 19:17
Sorry, must have neglected to post the link. Have amended the prior response to attach the link.