1099-R received no amount in 2a variable life insurance withdrawal

Forum|Forum|3 years ago
March 21, 2023
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We received a 1099-R for a variable universal life insurance withdrawal. The amount of withdrawal is in box 1. Box 2a life left blank and Taxable Amount Not Determined is checked. Box 7 is 7D. We withdrew $50,000 and we paid premiums to date with post tax funds of $63,500. My understanding is that none of the amount is taxable as we did not withdraw more than our basis. I am using Turbotax Premier. When I enter the 1099-R it asks if "yes, the amount in 2a is the taxable amount" (2a was blank). If I answer yes, it taxes the whole amount. Or I can choose "no a different amount is taxable" and go to next step, it wants me to do the Simplified Method or General Rule to "figure out the taxable amount of this annuity." It was a variable universal life insurance withdrawal. Can I just put in a 0 at 2a? or is the IRS looking for another form? Any help on how to proceed? I don't know why insurance company wouldn't put in a 0 if they knew how much we have already paid in premiums.

Not A Product Question

DaveF1006

According to the IRS, they stipulate that if your funds received were less than you paid in, this amount is not taxable. Put a zero in Box 2A and then when it asks if 0 is the taxable amount, say yes. This should alleviate the problem.

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Stephs-momAuthor

That is what I thought. I put "0" in 2a and then said yes this taxable amount and it let me continue and did not tax my withdrawal. I just want to be sure that is the correct step to take. Thank you.

Mike9241

just an FYI. the premiums you paid may not be your tax basis. contact the insurance company.

When you receive money from a nonqualified variable annuity, only your net gain—the earnings on your investment—is taxable. The money you contributed to the annuity isn’t taxed because you made it with after-tax dollars. As a result, a portion of each payment you receive is treated as principal (that is, a return of your investment in the contract) for tax purposes.
How is this calculated? Essentially, the nontaxable portion of each payment is determined by the ratio of your investment in the contract to the account balance. More precisely, the tax-free and taxable portions of annuity payments are figured using a special computation explained in IRS Publication 575.