I made my wife's SEP contribution of $53,000 on May, 2016. I withdrew the money on December, 2016 after I realized it was a mistake. Will I need to pay the excite tax?

Forum|Forum|7 years ago
June 1, 2019
1 reply
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The money was from the part of life insurance proceeding after my son passed away. It shouldn't be taxed! She has her own business, but it is inactive currently.

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t40vinson

Employee

Generally, life insurance funds you receive as a beneficiary due to the death of an insured person, isn't included in gross income and you don't have to report it. However, any INTEREST you receive on said funds is taxable and you should report it as interest received. So your best bet would be just to document if any interest had occurred while it was in your wife's SEP holding. If no interest occurred, then legally you do not have to pay tax on it. Hope this helps.