Life Insurance death benefit withheld taxes & shouldn't have in 2019, how do I get it back?

[ooglemonster]

I received the benefit of life insurance from the death of a loved one in 2019. I'm not so good about getting things I need to get done and I didn't owe money, so I'm only just now doing my 2019 taxes in the hopes of receiving all the stimulus money I'm owed (I'm unclear if I'll automatically receive it or if there's something I need to do for get it, though). Anyway, I never received any sort of tax form at the end of the year in 2019 about the life insurance payment to me or the 10% that was withheld. But now I'm learning it wasn't big enough to have been taxable. But I cannot figure out how on earth to get this withholding back! It's like it's just lost in space because I never received a tax form to show I paid it. I do have the statement that came along with the check, though, which shows exactly what I paid. Please help! Thanks.

[JoannaB2]

Yes, if you paid taxes on Life insurance proceeds that aren't taxable, you need to amend your 2019 income tax return to claim taxes paid.

Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income.. However, any interest you receive is taxable and you should report it as interest income. Life insurance proceeds aren't taxable, therefore, no tax withheld  but with one exception:  If the policyholder elects not to have the benefit paid out immediately upon his death but instead held by the life insurance company for a given period of time, the beneficiary may have to pay taxes on the interest generated during that period. And when a death benefit is paid to an estate, the person or persons inheriting the estate may have to pay estate taxes on it.

[ooglemonster]

I'm not sure if you read my question.

First, there is nothing to amend. I never filed my 2019 taxes.

Second, at the time that the benefits were paid out to me, they ENCOURAGED me to have taxes withheld, so I did. I had 10% withheld.

My question now is, how do I get it back? They didn't issue me any type of tax form. So how do I indicate that this money was withheld and get it returned to me?

[DavidD66 · Accepted solution]

The death benefit from a life insurance policy is not taxable to the beneficiary.  I doesn't make sense for the insurance company to withhold taxes, unless it was an annuity contract.  I suggest you contact the insurance company that withheld the tax to obtain a Form 1099-R, that would show the distribution and the tax withholding.  If you can't get that from the insurance company, request a Wage and Income Transcript, which shows data from information returns receive by the IRS such as Forms W-2, 1099, 1098 and Form 5498, IRA Contribution Information.  You can get that by going to:

Transcript Types and Ways to Order Them

The only way to resolve the situation is to file a 2019 tax return.

As for your stimulus payments;  In order to receive the first two stimulus payments, you will have to file a 2020 tax return and claim the Recovery Rebate Credit.  Filing a 2019 or 2020 tax return should indicate eligibility for the third stimulus, if you are eligible.