Skip to main content
April 11, 2024
Solved

1099R taxation of life insurance death payout

  • April 11, 2024
  • 1 reply
  • 0 views

I received a 1099-R for a life insurance payout as beneficiary for my wife's death.  It has code 0 (zero) in box 7 and claims to be taxable.  It was issued by her former employer.  The IRA/Sep/Simple box is checked.  It is not an IRA.  The amount was promised upon her death.  Why is this taxable and what does code 0 mean?  This code is not an option in TurboTax dropdown menu.

 

    Best answer by Bsch4477

    Payout of life insurance is not taxable. Code 0 is not legitimate. Contract the fiduciary for an explanation. 

    1 reply

    Bsch4477Answer
    Employee
    April 12, 2024

    Payout of life insurance is not taxable. Code 0 is not legitimate. Contract the fiduciary for an explanation. 

    colotomAuthor
    April 21, 2024

    Thx for your reply.  Confirmed what I thought.  I have been trying to contact the employer for 2 months now to see if they were in error or if there was a possible exception to the non taxable status that I did not know about.  No response until the day after I filed the return.  TurboTax has a drop down menu for box 7 which does not include code 0.  I am a volunteer for AARP Taxaide program which uses a different software that does allow code 0.  So I filed with that software, putting in the 1099 as I had it and the death benefit was taxed.  Figured I could amend once I finally heard from the employer.  Their response was that they had made an error and I was sent a corrected 1099.  This one shows no taxable amount, total distribution box checked, Sep/IRA box not checked and still code 0 in box 7.  The IRA must have received the same correction, since the tax amount owed was adjusted to the correct (non taxable benefit) amount.  I had put in an automatic debit request so I saw what was paid.  Amazed that the IRS fixed so quickly, unless something happened because of the code 0 on the initial 1099.  Once again thanks.

    Employee
    April 21, 2024

    Glad it worked out. I am a Taxaide volunteer also.