Life Insurance surrender: DIY Free TurboTax entry?

[stuart-td-anderson]

Is there a way to manually enter distribution, taxable amount, and life insurance premiums from a surrendered life insurance policy in DIY Free Edition TurboTax?

I surrendered a life insurance policy, received the distribution in 2025, and 1099-R in 2026.  

DIY TT only processes the 1099-R as an annuity distribution, whether manually entered or uploaded as a file… and pushes the transaction into a Schedule 1, requiring an upgrade to TT DIY  Deluxe, i.e. not free. 

[DavidD66]

Whether or not you can file for free with TurboTax when you have a Form 1099-R depends on the code in Box 7.  If your 1099-R is for the surrender of an insurance contact (policy) with code D (among others) in box 7, it is not considered a "Simple" tax return and is not supported by the Free Edition.  In this case you will have to upgrade and pay to file.   

[stuart-td-anderson]

This 1099-R is marked 7: normal distribution.

[stuart-td-anderson]

And the larger question: why does this version of TurboTax process the transaction as an annuity?  

Simple or not, there is no question (prompt, cue, help text…) that processes this as “life insurance."

[AmyC]

A life insurance payout when cashed out effectively become a deferred annuity contract. Therefore, annuity is the best fit to correctly tax the income.

The box 7 code D tells the IRS and the program it is life insurance. Why your form does not have the code would be for the issuer to answer. Since it doesn't, when you enter the 1099-R and answer the many questions, the program must choose between qualified or not qualified and the correct way to tax your form. 

IRS uses IRC code 72 for tax-deferred income that becomes ordinary income rather than capital gains.