Members of the Maryland Association of Certified Public...

Tax answers

February 27, 1996

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: I received a 1099 R from an insurance company. Box 1 lists gross distributions of $2,597.25, Box 2A taxable amount $2,322.06, Box 5 contributions for insurance premiums $1,757.40. Can I use box 5 as a deductible amount?

A: No, you can't. Generally, Box 5 shows the employee's investment in the contract (after-tax contributions), if any, recovered tax free this year; the part of premiums paid on commercial annuities or insurance contracts recovered tax free; or the nontaxable part of a charitable gift annuity. Box 2a should reflect the correct taxable amount to be reported on your return.

Remember that for the state of Maryland, if you are reporting taxable pension and/or retirement annuity income, you may be able to subtract some of this income on line 26 of Form 502. Be sure to read the instructions for Form 502 PE in the Maryland tax package.

Q: What is the most that could be contributed to a 401(k) plan in 1995?

A: The maximum contribution to a 401(k) plan for 1995 is $9,240, the same as in 1994.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

A joint service from The Sun and the Maryland Association of Certified Public Accountants can help you with your tax queries. Association members, all CPAs, will answer questions from readers until April 15. To ask a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. Using a touch-tone phone, enter 6225 after you hear the greeting.

Callers are asked to leave their names and phone numbers, should questions need to be clarified. Selected questions will be answered in the Business section. No questions will be answered by phone. Names and numbers will not be published.

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