initial annuity check dated 12/31/23 but arrived in 2024...

[developer]

I recently bought a life annuity and received the first check on January 3. However, the check was dated 12/31/23 so I fully expect to receive a 1099-R for 2023.

The problem is that my marginal tax bracket is unusually high for 2023 (43% with NIIT & state tax). Going forward, most of my retirement income is non-taxable so my marginal bracket will only be 12.5% bracket for 2024, so I can save almost $900 by reporting that first check in 2024. As a cash-basis taxpayer, I believe I'm allowed to do that as long as I attach an explanation (IRS computers will flag unreported 1099 income).

There's a complicating factor... the annuity check apparently got generated before my withholding opt-out form was processed, so it had some federal withholding. My plan is to report the income & withholding on my 2024 return.

Thoughts?

 

[developer]

Just to follow up in case anyone is interested... As expected, I received a 1099-R for the annuity check dated 12/31/23.

I found something in the IRC (Section 1.451.2) that makes it clear I'm not required to report the income in 2023, under the constructive receipt doctrine for cash basis taxpayers. What's not clear is how to handle this on my tax returns.

Rather than omit the income and attach an explanatory statement, I decided to report the income on line 1040 5a & 5b, and then back it out on Sch 1, line 24z, which includes space for explanation. Then I'll report the income on my 2024 return on the same line.