{"id":8588,"date":"2024-11-26T12:54:28","date_gmt":"2024-11-26T12:54:28","guid":{"rendered":"https:\/\/finderica.com\/guide-to-tax-form-1099-sb\/"},"modified":"2024-11-26T12:54:28","modified_gmt":"2024-11-26T12:54:28","slug":"guide-to-tax-form-1099-sb","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=8588","title":{"rendered":"Guide to Tax Form 1099-SB"},"content":{"rendered":"\n<div>\n<p>If you sold a life insurance policy this year, you may receive Form 1099-SB. This tax form informs you and the Internal Revenue Service (IRS) about the sale or transfer of a life insurance contract. But what does this mean for your taxes? Let\u2019s walk through what the 1099-SB form is, why you received it, and how to handle it on your tax return.<\/p>\n<p><strong>At a glance:<\/strong><\/p>\n<ul>\n<li>When you sell a life insurance policy, the issuer sends you Form 1099-SB, which reports your basis in the contract.<\/li>\n<li>You\u2019ll also receive Form 1099-LS, which reports how much the buyer paid for the policy.<\/li>\n<li>These two forms can help determine if you owe any income tax on the policy sale.<\/li>\n<li>You will not owe taxes if you sold the policy for less than your basis.<\/li>\n<\/ul>\n<h2>What is a 1099-SB form?<\/h2>\n<p>Form 1099-SB, Seller\u2019s Investment in Life Insurance Contract, reports how much you paid into a life insurance policy. When you sell or transfer your life insurance policy to a third party, it\u2019s called a reportable policy sale, and the IRS requires the issuer of the life insurance contract to send you Form 1099-SB.<\/p>\n<h3>What is the purpose of a 1099-SB?<\/h3>\n<p>Selling a life insurance policy can be a taxable event, but only if you sold it for more than your cost basis. That\u2019s what Form 1099-SB is for \u2014 it tells you the cost basis of your life insurance policy.<\/p>\n<p>Receiving Form 1099-SB does not automatically mean you owe taxes on the life insurance sale. It\u2019s simply an informational form that tells you and the IRS how much you\u2019ve paid in policy premiums. You don\u2019t need to report Form 1099-SB on your tax return, but you can use it in conjunction with Form 1099-LS, which reports how much you sold your policy for, to determine if you have taxable income to report.<\/p>\n<h2>IRS Form 1099-SB example<\/h2>\n<p>Here\u2019s what this form looks like and a breakdown of the key sections:<\/p>\n<p><img fetchpriority=\"high\" fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-full wp-image-163665\" src=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-1.png\" alt=\"IRS Form 1099-SB\" width=\"743\" height=\"334\" srcset=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-1.png 743w, https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-1-300x135.png 300w\" sizes=\"(max-width: 743px) 100vw, 743px\"\/><\/p>\n<p>On the left:<\/p>\n<ul>\n<li>The contact information for the policy issuer, including their taxpayer identification number (TIN).<\/li>\n<li>The seller\u2019s information (you), including your policy number and TIN, which is often your Social Security number.<\/li>\n<\/ul>\n<p>On the right:<\/p>\n<ul>\n<li><strong>Box 1: Investment in contract<\/strong> \u2013 This is the total premiums you\u2019ve paid toward the life insurance policy, excluding any dividends or earnings you may have received. This number serves as your basis for determining any taxable gains.<\/li>\n<li><strong>Box 2: Surrender amount<\/strong> \u2013 This is the amount you would have received from the issuer if you surrendered the policy (canceled it) instead of selling it. This number only comes into play if you sold your policy for more than your basis. Remember, the acquirer (the party who bought the policy) should also send you Form 1099-LS, showing how much they paid you for the contract.<\/li>\n<\/ul>\n<h2>Form 1099-SB instructions<\/h2>\n<p>Not sure what to do with Form 1099-SB now that you have it? Follow these steps:<\/p>\n<ol>\n<li><strong>Check for accuracy<\/strong>: Verify the details, like the policy number, payer information, and amount in Box 1. If anything seems off, contact the issuer right away.<\/li>\n<li><strong>Look for Form 1099-LS<\/strong>: If you sold your life insurance policy, the buyer must send you Form 1099-LS, which shows how much they paid for the policy.<\/li>\n<li><strong>Determine taxable income<\/strong>: If the amount in 1099-LS Box 1 is greater than the amount in 1099-SB Box 1, you may owe taxes on the excess amount (more on that below).<\/li>\n<li><strong>E-file your tax return<\/strong>: If you have taxable income to report from the policy sale, TaxAct\u00ae can help you navigate this step without hassle \u2014 just make sure you have your tax forms handy to answer our interview questions.<\/li>\n<\/ol>\n<h2>FAQs about Form 1099-SB<\/h2>\n<h3>What\u2019s the difference between surrendering a life insurance policy and selling it?<\/h3>\n<p>Surrendering and selling are two ways to cash out your life insurance policy. Surrendering essentially cancels the policy, while selling transfers it to another third party:<\/p>\n<ul>\n<li><strong>When you surrender your life insurance policy,<\/strong> you\u2019re canceling it and getting whatever cash surrender value you\u2019ve built up. The policyholder (you) receives a lump sum, but it\u2019s typically less than the full value of the policy since you\u2019re forfeiting future coverage.<\/li>\n<li><strong>When you sell your policy<\/strong> in a reportable life insurance sale, you transfer ownership of the policy to a third-party acquirer in exchange for a lump sum (typically more than the surrender amount). The buyer takes over paying the premiums, and they will receive the death benefits when you pass away.<\/li>\n<\/ul>\n<p>Both scenarios only result in a taxable event if your cash-out payment exceeds your basis in the policy (Box 1 of Form 1099-SB).<\/p>\n<h3>Where do I report 1099-SB on Form 1040?<\/h3>\n<p>You don\u2019t need to report the 1099-SB form directly on your federal tax return (Form 1040). Instead, you\u2019ll use it to figure out if you owe taxes on the sale of the life insurance policy. If you sold the policy for more than your basis (Box 1), any excess up to the cash surrender value (Box 2) gets reported as \u201cOther Income\u201d on Form 1040. Any additional excess greater than the cash surrender value is reported on Schedule D as a capital gain. TaxAct can help you with both scenarios (see the instructions in the next section).<\/p>\n<h3>When is the due date for issuers to send Form 1099-SB?<\/h3>\n<p>IRS reporting requirements for Form 1099-SB require the issuer of a life insurance contract to send the form to filers by Jan. 31, so expect to see it in your mailbox or inbox by mid-February.<\/p>\n<h3>What happens if I don\u2019t get a 1099-SB form?<\/h3>\n<p>If you sold or transferred a life insurance policy but didn\u2019t receive a 1099-SB form, contact the policy issuer to request it \u2014 you\u2019ll need the form to report any taxable income from the sale.<\/p>\n<p>Still have questions about Form 1099-SB? Check out <a href=\"https:\/\/www.irs.gov\/instructions\/i1099sb\" target=\"_blank\" rel=\"noopener\">the official IRS instructions for this form at irs.gov<\/a>.<\/p>\n<h2>How to report Form 1099-SB with TaxAct<\/h2>\n<p>While you don\u2019t need to file Form 1099-SB specifically on your tax return, you can use it alongside Form 1099-LS to determine if you have any taxable income to report. If you do, here\u2019s how to report it in TaxAct. (If these steps look familiar, you might have seen them before in our Form 1099-LS article.)<\/p>\n<h3>To report ordinary income:<\/h3>\n<ol>\n<li>Click\u00a0<strong>Federal<\/strong>\u00a0in the left navigation.<\/li>\n<li>On the\u00a0<strong>Federal Quick Q&amp;A Topics\u00a0<\/strong>screen, click\u00a0<strong>Other Income<\/strong>\u00a0to expand the category.<\/li>\n<li>Click\u00a0<strong>Prizes, awards or other miscellaneous income<\/strong>\u00a0as shown below.<\/li>\n<\/ol>\n<p><img decoding=\"async\" class=\"alignnone wp-image-163670 size-full\" src=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/1099-sb-ordinary-income-step-1.png\" alt=\"A screenshot of how to report income from Form 1099-SB as a ordinary income using TaxAct\" width=\"697\" height=\"788\" srcset=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/1099-sb-ordinary-income-step-1.png 697w, https:\/\/blog.taxact.com\/wp-content\/uploads\/1099-sb-ordinary-income-step-1-265x300.png 265w\" sizes=\"(max-width: 697px) 100vw, 697px\"\/><\/p>\n<ol start=\"4\">\n<li>Enter the amount and description in one of the two\u00a0<strong>Other Income <\/strong>lines as shown below.<\/li>\n<\/ol>\n<p><img decoding=\"async\" class=\"alignnone wp-image-163671 size-full\" src=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/1099-sb-ordinary-income-step-2.png\" alt=\"A screenshot showing how to report ordinary from 1099-SB as other income using TaxAct\" width=\"916\" height=\"652\" srcset=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/1099-sb-ordinary-income-step-2.png 916w, https:\/\/blog.taxact.com\/wp-content\/uploads\/1099-sb-ordinary-income-step-2-300x214.png 300w, https:\/\/blog.taxact.com\/wp-content\/uploads\/1099-sb-ordinary-income-step-2-768x547.png 768w\" sizes=\"(max-width: 916px) 100vw, 916px\"\/><\/p>\n<h3>To report capital gains:<\/h3>\n<ol>\n<li>Click\u00a0<strong>Federal<\/strong>\u00a0in the left navigation.<\/li>\n<li>On the\u00a0<strong>Federal Quick Q&amp;A Topics\u00a0<\/strong>screen, click\u00a0<strong>Investment Income<\/strong>\u00a0to expand the category.<\/li>\n<li>Click\u00a0<strong>Gain or loss on the sale of investments<\/strong>\u00a0to expand the category.<\/li>\n<li>Click\u00a0<strong>Capital gain or loss (Form 1099-B)\u00a0<\/strong>as shown below.<\/li>\n<\/ol>\n<p><img loading=\"lazy\" loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-163673 size-full\" src=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-1.png\" alt=\"A screenshot of how to report income from Form 1099-SB as a capital gain using TaxAct\" width=\"707\" height=\"645\" srcset=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-1.png 707w, https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-1-300x274.png 300w\" sizes=\"auto, (max-width: 707px) 100vw, 707px\"\/><\/p>\n<ol start=\"5\">\n<li>Proceed with entering the transaction details. Under\u00a0<strong>Term and Type<\/strong>, you\u2019ll be able to select whether it was a short-term gain (you had the policy for a year or less) or long-term gain (you had the policy for over a year) for which you did not receive a Form 1099-B, as shown below:<\/li>\n<\/ol>\n<p><img loading=\"lazy\" loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-163668 size-full\" src=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-2.png\" alt=\"A screenshot of how to report short-term or long-term gains from Form 1099-SB using TaxAct\" width=\"1277\" height=\"689\" srcset=\"https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-2.png 1277w, https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-2-300x162.png 300w, https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-2-1024x552.png 1024w, https:\/\/blog.taxact.com\/wp-content\/uploads\/form-1099-sb-capital-gains-step-2-768x414.png 768w\" sizes=\"auto, (max-width: 1277px) 100vw, 1277px\"\/><\/p>\n<h2>The bottom line<\/h2>\n<p>Selling a life insurance policy sometimes comes with tax implications, but receiving a 1099-SB form doesn\u2019t have to be stressful. Remember, Form 1099-SB simply informs you (and the IRS) about the sale of your life insurance contract. Use it alongside Form 1099-LS to determine if you owe income tax, then e-file with TaxAct for step-by-step tax filing assistance. We can help you take out the guesswork and file with confidence this tax year.<\/p>\n<h6>This article is for informational purposes only and not legal or financial advice.<\/h6>\n<h6>All TaxAct offers, products and services are subject to <a href=\"https:\/\/www.taxact.com\/legal-notice\" target=\"_blank\" rel=\"noopener\">applicable\u00a0terms and conditions<\/a>.<\/h6>\n<\/p><\/div>\n<p><a href=\"https:\/\/blog.taxact.com\/guide-to-1099-sb-form\/\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you sold a life insurance policy this year, you may receive Form 1099-SB. This tax form informs you and the Internal Revenue Service (IRS) about the sale or transfer of a life insurance contract. But what does this mean for your taxes? Let\u2019s walk through what the 1099-SB form is, why you received it,<\/p>\n","protected":false},"author":1,"featured_media":8589,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[188],"tags":[3025,266,265,97],"class_list":{"0":"post-8588","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-taxes","8":"tag-1099sb","9":"tag-form","10":"tag-guide","11":"tag-tax"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/8588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8588"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/8588\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/8589"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}