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New Member
posted Mar 14, 2023 7:39:29 AM

Surrender charges (penalty) included in distribution amount on 1099 R

Cashed out a life insurance policy and recieved 122K total.  Paid 108K over the past 10 years.  Received a 1099R showing distibution amount of 126K in box 1 and taxable amount of 18K and that I paid 108K.  Do I really owe taxes on the 4k I did not receive that was a pentaly called a surrender charge?  Please help. Called IRS and they did not know.  They told me to call the insurance company.

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2 Replies
Expert Alumni
Mar 14, 2023 9:04:49 AM

Yes, you should call the insurance company and ask for a corrected 1099-R. If you are not able to get a corrected 1099-R form, you should follow the procedure for when your 1099-R is missing or incorrect. 

 

First, contact the IRS to report that your insurance company is not providing you with a corrected 1099-R form. Call them at 1-800-829-1040 or make an appointment at the Taxpayer Assistance Center (TAC). Click here to find a TAC near you. 

 

Next, they will contact the insurance company and request that they provide you a corrected copy.

 

After that, the IRS will send you instructions for filing a substitute 1099-R on Form 4852. To do that in TurboTax:

 

  1. Open your tax return and select Federal on the left side menu.
  2. Under  Wages & Income, find IRA, 401(k), Pension Plan Withdrawals (1099-R).
  3. Select Add/ Edit to the right.
  4. Answer Yes on the next screen.
  5. Follow the instructions to import or enter your 1099-R manually.
  6. To enter the form manually, scroll to the bottom and select Change how I enter my form.
  7. On the next screen select, I'll type it in myself.
  8. On the screen, Do any of these situations apply to you?, select the second choice, I need to file a substitute 1099-R, select Continue.
  9. Read  the next few screens carefully and provide a detailed explanation.
  10. When you get to Print and attach Form 4852, be sure to print and/ or save a copy for your records.

Please note you will be able to print and mail in your tax return with a substitute 1099-R statement, but you won't be able to e-file. 

New Member
Mar 14, 2023 10:08:14 AM

Thank you so much Julie. I called the insurance company and they said they would email the tax department with my dilemma but no guarantees. I really appreciate the process you outlined if it is not resolved by the insurance company. You are the 1st person I have communicated with that really knows has a handle on this. Thanks again. Jim