Do I need to report money I got from a life insurance policy surrender?

[MinhT · Accepted solution]

You only report as income the gain when the amount received at surrender of the life insurance policy exceeds the total of all premiums that you have paid. This is the case for very old policies.

If the surrender is less than all premiums paid, you do not report it on your return.

[dlm12601]

Turbotax is picking up the gross distribution instead of just the taxable amount and adding it to earnings

[Raj50]

Which version of turbo tax do i need to use to make sure this is an option? ie. that it will help me with this option

[AmyC]

@dlm12601 I am going to assume you received a 1099-R. If the taxable amount is correct and different from the gross, the box Total Distribution, should NOT be checked. The tax return will show the gross amount on line 5a but only the taxable amount should be on line 5b.

@Raj50 You can use any of the software options to enter the 10999-R.

[dianthat12]

I appreciated the answer to my question regarding life insurance, however, where do you put taxes that were withheld.

[dianthat12]

No I did not receive a form 1099

[dianthat12]

Where do I report the surrender when taxes were withheld.

[Opus 17]

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@dianthat12 wrote:

I appreciated the answer to my question regarding life insurance, however, where do you put taxes that were withheld.

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What kind of paperwork did you get?  You almost always should get a 1099-R, are you sure you didn't get one?  It was not required to be mailed until 1/31/23, it would not have been given to you when the check was mailed. You might want to call the life insurance company and check.

There is a place to enter taxes withheld, but if your entry there does not match a document on file with the IRS, they will disallow it and send you a bill for back taxes.  It would be much better to have a reporting document for what you were paid, why, and how much was withheld.

[dianthat12]

Thank you so much.  That is what I thought.   I only received a letter with the amount of taxes withheld in the letter.

[AmyC]

Follow these steps:

1. Go to deductions and credits
2. Scroll down to Estimates and Other Taxes Paid
3. Scroll down to Other Income Taxes Paid in 2022
4. Select Withholding not already entered on a w2 or 1099

Since you have the letter, you can prove the amount to the IRS. If you are asked, never send the original, only a copy. They have a great upload tool now so hopefully you never need to send anything.

@dianthat12