We surrendered an old life insurance policy. MassMutual withheld Fed and State taxes that total $422. They tell us we will NOT get a 1099-R. How do we file this?

[jeanneandsteveo]

We need to account for the taxes PAID to Fed and State and I'm not sure how to do it.

[MichaelL1 · Accepted solution]

First look at  "dmertz's" comment below,  then "contact them to get a 1099R to reflect the taxes withheld."

Only then if that failed (to get the 1099R) follow steps below. 

To get credit for the Taxes withheld go to 

Personal Tab (not Personal Information)

Deductions and Credits

I'll chose what I work on.

Estimates and other taxed paid

Other Income taxes

to bottom: other Income taxes Paid in 2016

Withholding not already entered on a W-2 or 1099 and click enter.

---------

Any income from the transaction that needs to be shown can be entered as follows: 

I show you as using the CD/download version of TurboTax.

Go to Forms in upper Right corner in the blue area.

In the Left side of the screen open the Form 1040

Go to Line 21 Other Income

right click and it will open "Other Income Statement Worksheet"

type in MASS Mutual to the left and dollar amount of income in the right side in line 18, then go back and look at the Form 1040 and it will be there. 

[dmertz]

If MassMutual withheld taxes, they MUST issue a Form 1099-R.

It also seems odd that they would withhold taxes if the taxable amount of this distribution was less than the $10 threshold for being required to issue a Form 1099-R.  I suspect that the rep who you spoke to gave you bad information.

[jeanneandsteveo]

We have finally gotten a response from MassMutual, and they said that "the IRS has given insurance companies certain minimum reporting guidelines as to net gain and 1099 requirements", and that our net gain (which we now finally know!) was less than the minimum amount.  Just a note here - our net gain was well over $2000., so there's no telling what that minimum is.  It certainly isn't $10.  And they do add that our net gain is considered income.  So, we have to report, but we don't get a 1099.  Pretty cruddy.

[dmertz]

Unless there is a miscommunication somewhere, this is certainly a situation where they are required to issue a Form 1099-R.  Although it's difficult to get through, I would contact the IRS regarding this since the IRS does not take kindly to companies that fail to issue required Forms 1099-R.  My father had a similar situation and within a week of contacting the IRS he had the proper Form 1099-R in hand.

Otherwise, you'll need to prepare a substitute Form 1099-R (Form 4852) with explanation.

[dmertz]

See Tax Topic 154 on the IRS website:  <a rel="nofollow" target="_blank" href="https://www.irs.gov/taxtopics/tc154.html">https://www.irs.gov/taxtopics/tc154.html</a>

[jeanneandsteveo]

I DID call the IRS - last week - and all they told me was that I needed to call back Mass Mutual to find out what our net gain was.  Nothing about Mass Mutual having to send us a 1099.  And the first customer service rep I talked to at Mass Mutual told me to call Turbo Tax!  So, my husband and I are the ping pong balls and it's very disheartening.  And, as I'm understanding things so far, we won't be able to e-file when we do the substitute Form 1099-R.

[dmertz]

Yes, I believe that filing a substitute Form 1099-R will require mailing your tax return.

See page 1 of the Instructions for Forms 1099-R which indicates that reporting is required if the gross amount of the distribution is $10 or more.  However, see page 2 which says, "you do not need to file Form 1099-R to report the surrender of a life insurance contract if it is reasonable to believe that none of the payment is includible in the income of the recipient."  Of course, why would there be any tax withholding if they believed that none of the distribution would be taxable.  <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1099r_16.pdf">https://www.irs.gov/pub/irs-pdf/i1099r_16.pdf</a>

Keep in mind, the taxable amount is the gain is relative to the premiums paid in, not simply gains from investment performance.  For example, if you paid in $10,000, investments produced $2,000 of returns, but $3,000 went to cover the insurance mortality charges, the surrender value of $9,000 means that you have no gain relative to the $10,000 paid in.