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I just cashed in our ins policies......we took them out in

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2008 with aarp and have...
I just cashed in our ins policies......we took them out in 2008 with aarp and have paid in 19,000 dollars in premiums for the 2 of us for life ins......we cashed them in for 6334.70....do I have to pay income tax on the withdrawal or the difference between what I paid in and what I am withdrawing.......which is approx........13,000. in income tax....I am confused......a senior citizen in texas
Submitted: 2 years ago.Category: Tax
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6/30/2015
Tax Professional: Barbara, Enrolled Agent replied 2 years ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,065
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** it will be my pleasure to assist you with your tax question today.
If the cash surrender value is MORE than the premiums and you surrender the policy (cancel it), the excess is earnings and taxable income. In your case, if you paid $19,000 in policy premiums for 7 years and you cash in the policy and receive $6,334.70, you do not owe any tax.
You should receive a Form 1099-R showing the total proceeds and the taxable part. Report these amounts on lines 16a and 16b of Form 1040.
The following link contains excellent information which you will find helpful:
http://finance.zacks.com/calculate-taxable-income-cashing-out-life-insurance-predeath-1513.html
Please let me know if you require further information or clarification.
Thank you and best regards,
Barb
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Tax Professional: Barbara, Enrolled Agent replied 2 years ago
I see you are now offline. If you have any other questions, please come back to me at your convenience, and I will be happy to assist you. If not, please take a moment to rate my answer since that is the only way I receive credit for answering you and alerts Just Answer to compensate me.
Best regards,
Barb
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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,877
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi,I am a different expert and have a different answer.You will not have any tax here.You will likely NOT not receive a 1099-R..From the Instructions for 1099-R from IRS to those sending out the form (such as life insurance companies)...(You'll find this on page 2, here): http://www.irs.gov/pub/irs-pdf/i1099r.pdfSee this:."However, you do not need to file Form 1099-R to report the surrender of a life insurance contract if it is reasonable to believe that none of the payment is includible in the income of the recipient. ".Most important; You will not be taxed here..Lane.Let me know if you ae any questions at all, but If this HAS helped, I would appreciate a positive rating (using the stars or smiley faces on your screen)… That’s the ONLY WAY I can be credited for the work here.
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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