I received full distribution of my own surrendered life insurance from a foreign country. Previously, a TT tax adviser said that I should put it under "Misc income" section. However, with further reading and research, shouldn't I put this distribution under 1099-R and also fill out form 4852 as TT software asked me to do after I filled out the 1099-R section?
Since this is foreign income entering it as a substitute 1099-R or as 'Other Income' actually won't make any difference to how much you are taxed. It also won't change your ability to claim the foreign tax credit if you paid any foreign taxes on this income. So the 'Other Income' route is just faster and easier.
Thank you.
Should I make a note somewhere in that "Other Income" section that will show: total distribution - premium cost = taxable amount (gained/appreciated)?
You can. You could make two entries - one a positive amount for the total amount received and one a negative amount for the premium cost so that only the net shows up as taxable income. But either way you need to retain all of your records in case you are ever questioned about this.
On the Income Topics page, scroll al the way down to Miscellaneous Income, 1099-A, 1099-C, Start/Update.
On the next page, scroll all the way down to Other Reportable Income, Start/Update.
'Any other taxable income?', YES.
On the next page enter a Description (Life Insurance Policy Proceeds?), and Amount.
Thank you
There's only one "Amount" space to put the amount. Should I put the total rcvd - premium = taxable amount?
In 1099-Misc, I think I could put longer "Description". Please advise again.
Yes, you can enter the amount as the taxable amount calculated above. If you can't enter the full description of "Life insurance policy proceeds" you can abbreviate to shorten the description.
Thank you.
Previously, I've entered the taxable amount under 1099-R and then Form 4852.
Could you please confirm for sure that I don't need to do those forms again. Form 4852 heading said
"Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc."
The Form 4852 is for when a 1099-R should have been issued but was not- the IRS will investigate and penalize the issuer. If it was from a foreign country, they were most likely not required to file a 1099-R for you. @WenHN
Correct, they didn't provide me anything.
Hence, should I use form 1099-R and Form 4852 instead? I'm so sorry, I'm still quite confused about this.