My aunt passed away and I am the beneficiary of her life insurance proceeds in a lump sum payment. I received a 1099-R which includes the Gross distribution (box 1), Taxable amount (box 2a), Fed tax withheld (box 4) and State tax withheld (box 14). Turbo Tax says that life insurance proceeds are not taxable and seems to imply I do not need to enter the info into the 1099-R section of Turbo Tax. Furthermore, that section also appears to be designed mainly for IRA, 401K, or pension related withdrawals and rollovers and does not accommodate life insurance proceeds (it starts asking about withdrawals and RMD's which does not apply in my case). Given this, where do I report the Fed and State tax withholdings?
I tried entering them in the "Other Income Taxes" section under Deductions & Credits but after Turbo Tax checks my State return it says it cannot e-file my return because I have withholdings from sources other than W2, 1099R, 1099INT, 1099DIV, etc. and I will need to print out and file by mail.
Please advise where I can report my Fed and State tax withholdings while not treating my life insurance proceeds as taxable income. Thank you.
