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I have two retirement accounts with State Farm. I retired…

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I have two retirement...

I have two retirement accounts with State Farm. I retired this year but earned between 13,000 and 14,000 before beginning my Soc Sec. I transferred 7,000 out of one account to pay for Life Insurance. I decided to cancel the policy ( too expensive ) and received the money back. Will this count as taxable income?

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

I don't think so.

Submitted: 7 months ago.Category: Tax
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12/26/2017
Tax Professional: Lev, Tax Advisor replied 7 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,388
Experience: Taxes, Immigration, Labor Relations
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If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy.

In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income.

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Tax Professional: Lev, Tax Advisor replied 7 months ago

You should receive a Form 1099R showing the total proceeds and the taxable part.

Report these amounts on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A.

.

While there might be some taxable income - that is not -earned income - and it will NOT affect your social security benefits.

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