1099R (Employee Contributions)

[Edward]

Civil service employee had 46000.00 total contributions as shown on the 1099R. He had been recovering the investment over the years and then passed away in 2007. According to page 5-17 of QF, it states that UNRECOVERED cost of annuities is to be recovered on the decedent's last return. Have client that went to J-Hewitt and rather than recover on Sch A (surviving spouse was able to Itemize), they continued to recover the cost on the 2007 and 2008 tax returns. Do we have the option of going either way -- continuing the recovery as was, or should they have taken the balance and placed on Sch A? Thanks

[kcjenkins]

It's not an option, JH was wrong.

[Edward]

kcjenkins: I did some more research on this and noticed that in pub 721, page 23 under part V is says under the simplified method that she can continue using the retire's monthly exclusion - and then further down it says the unrecovered cost CAN be claimed as an itemized deduction. So does this mean that we can go either way? I sure never new that. Wow, guess I learn something every day. What do you think? Thanks.