Annuity Gift - A Blessing or Tax Curse
Posted: Mon Aug 05, 2019 9:47 pm
I’ve been working for a small private company for the past 5-years. The owner of the company recently sold the business, and to reward his loyal employees, he funded a 5-Year 3% Guaranteed Annuity for each person.
He told me that I would be receiving an Annuity of $144,000, but that it would be taxed when the account was funded. Today I received a letter from the Insurance Company that issued the Annuity and it said that $104,000 was funded to my account, which means it was taxed at 28%.
Is that 28% the only tax I’ll have to pay for now until I begin receiving payouts from the Annuity when it’s considered ordinary income, or will I be taxed this year on all of my income - $205,000 Salary + $144,000 Annuity Bonus… a total of $349,000 Gross Income.
I’m worried that I’ll be taxed through the nose on the whole $349,000 even though a sizeable portion of that money is tucked away in the Annuity and can’t be used to pay for the tax liability if I owe.
Has anyone seen this situation before and able to shed some light? I’m not able to locate similar situations here or elsewhere and I’m eager to get a better understanding of the tax implications. Thanks in advance for any contributions to the discussion.
He told me that I would be receiving an Annuity of $144,000, but that it would be taxed when the account was funded. Today I received a letter from the Insurance Company that issued the Annuity and it said that $104,000 was funded to my account, which means it was taxed at 28%.
Is that 28% the only tax I’ll have to pay for now until I begin receiving payouts from the Annuity when it’s considered ordinary income, or will I be taxed this year on all of my income - $205,000 Salary + $144,000 Annuity Bonus… a total of $349,000 Gross Income.
I’m worried that I’ll be taxed through the nose on the whole $349,000 even though a sizeable portion of that money is tucked away in the Annuity and can’t be used to pay for the tax liability if I owe.
Has anyone seen this situation before and able to shed some light? I’m not able to locate similar situations here or elsewhere and I’m eager to get a better understanding of the tax implications. Thanks in advance for any contributions to the discussion.