WHen you cash in a life insurance policy the amount of premiums that you paid in are not taxable. The insurance company will often put the full amount as taxable in box 2 of the 1099-R but then check the "taxable amount not determined" box because they don't want to do the math.
So you should document the premiums that you paid for the policies and add them up. When you enter the 1099-R in TurboTax enter the Box 1 and Box 2 amounts exactly as they are on the form. Check the 'taxable amount not determined' box even if they didn't.
When you're going through the steps after entering the form you will tell the system that 'a different amount is taxable.' Since this is likely a non-qualified plan you will use the General rule to figure out what portion is taxable. That just means adding up the premiums that you paid, deducting it from the total that you received and entering the amount that remains as the taxable gain on the policy.
Then you need to save your records. Be sure that if the IRS has any questions that you are prepared to prove that you paid those premiums and owned that policy.
@patany
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