Your taxperson is correct. The reason you want to make this calculation is that not all of your annuity is taxable. You are permitted to deduct what you contributed to your retirement plan. However your contribution must be prorated. This calculation is for your benefit. There is an IRS publication 575 that discusses this and includes a worksheet to make the calculation. See http://www.irs.gov/forms_pubs/pubs/p575toc.htmKeep the worksheet from year to year to track the amount of contribution has been deducted.
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