There are certain conditions to be met for that income to escape self employment tax.
the IRS says this regarding retired insurance salesmen:
"FORMER INSURANCE SALESPERSONS - When a former insurance salesperson receives termination payments these payments are not self-employment income if all of the following conditions are met: (1) the amount of payments is not based upon length of service or overall earnings from service performed for the company, (2) you received the payments after your agreement to perform the services with the company ended, (3) you did not perform any services for the company after your service agreement ended and before the end of the year you received the payment, (4) you entered into a covenant not to compete against the company for at least 1-year beginning on the date your service agreement ended, and (5) the amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement."
Do you meet those conditions?
