1099-R surrender of a life insurance policy $21,688.90 but I paid $29,044 in premiums (basis) where do I report the basis?

[SabrinaD2 · Accepted solution]

When you surrender a life insurance policy, you need to report the taxable amount on your tax return. Since your premiums paid ($29,044) exceed the surrender value ($21,688.90), you likely won't have a taxable gain.

• Form 1099-R: The insurance company should have reported the gross distribution in Box 1 and the taxable amount in Box 2a. If Box 2a shows a taxable amount, it might be incorrect given your basis is higher than the distribution. Double-check with the issuer to ensure accuracy.

You can manually enter your 1099-R for life insurance in TurboTax. Here's how:

1. TurboTax Online/Mobile:
   • Be sure you are logged into TurboTax for Links to work
   • Go to the 1099-R section.
   • Check the taxable amount: If the taxable amount (surrender value less premiums) in Box 2a of your 1099-R is incorrect, request the issuer to provide a corrected 1099-R.
   • Proceed through the questions and select Non-qualified plans include life insurance policies, private or purchased, commercial annuities, and military retirement plans - when prompted.

For more detailed information, you can refer to TurboTax's guide on reporting 1099-R and Is Life Insurance Taxable.

[POORBEER]

Sabrina D2,

Thank you for your prompt reply.  I have already requested a letter from them for the amount of premiums that were paid.  

I will place another call to them for a corrected 1099-R.  The taxable amount shows $0.  but the Taxable amount not deternined Box 2b is checked.  Thank you again for your assistance.

Poorbeer

[SusanY1]

It sounds like your 1099-R is correct.  The $0 in the taxable amount box would make sense given the amounts that you have indicated and while it's a bit confusing it's also common for the "taxable amount not determined" box to be checked.  

Having that box checked essentially means the company is shifting the burden to you - even though they provided an amount in box 2.  

You are likely to find the insurance company won't correct the 1099-R for this issue, and it won't cause any problems when you file.