I receive a federal death benefit annuity for my first husband. I received a Form CSF 1099-R. Is the annuity fully taxable?
The tax treatment of this special death benefit depends on:
- The payment option you chose
- Whether a federal employees retirement system (FERS) survivor annuity is also paid
If you chose the single-payment option, use these rules for figuring the tax:
- If a FERS survivor annuity isn't paid, at least part of the special death benefit is tax-free. The tax-free part is equal to the employee's FERS contributions.
- If a FERS survivor annuity is paid, all of the special death benefit is taxable. You can't allocate any of the employee's FERS contributions to the special death benefit.
If you chose the three-year annuity option, at least part of each monthly payment is tax-free. Use these rules for figuring the tax:
- If a FERS survivor annuity isn't paid, the tax-free part of each monthly payment is an amount equal to the employee's FERS contributions divided by 36.
- If a FERS survivor annuity is paid, you'll allocate the employee's FERS contributions between the three-year annuity and the survivor annuity. To learn how to do this, see Publication 721, part IV.
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