Understanding Your Tax Forms
We mail IRS Form 1099s to life insurance policy and annuity contract owners
by January 31 for the previous year
If you receive a 1099 from us, you may have questions about why you received this form or what it means. The following information explains Forms 1099-R and 1099-INT for life insurance policy and annuity contract owners and answers the most frequently asked questions about these forms.
The content on this page is for informational purposes only. It is not tax advice. If you have any additional questions, please consult your Tax Advisor. You may also contact Life and Annuity Operations, however please be advised that our representatives are not licensed to give advice on tax reporting.
Reports taxable events
If you own a life insurance policy, the 1099-R could be the result of a taxable event, such as a full surrender, partial withdrawal, loan or dividend transaction.
If you own an annuity, the 1099-R could be the result of a full surrender, a partial withdrawal or the transfer of the contract to a new owner. If an annuity is owned by a "non-natural person," such as a trust, then any gain in the contract is taxable. If you are receiving payments from your annuity, the taxable portion of those distributions will be recorded on the 1099-R.
This is the total amount of the policy/contract distribution before deducting any loans or loan interest. This number may differ from the policy's net surrender value.
This is the total earnings, or profit, on an insurance policy or annuity contract that has been distributed to the policy/contract owner for that year. The calculation is made as follows:
Gross distribution (Box1) – Employee contributions or insurance premiums (Box 5) = Taxable Amount (Box 2a)
Employee contributions or insurance premiums
For traditional products, this is the difference between the amount of premiums paid into the policy/contract less the value of the dividends credited. A negative amount indicates the dividends credited exceeded the premiums paid. For variable products, this is the total amount paid into the policy/contract. Note that any rider premium(s) would be excluded.
Each code identifies the type of distribution the policy/contract owner received. Phoenix sends a separate Form 1099-R for each type of distribution taken throughout the year.
Reports interest income earned during the previous year
The interest earnings may have resulted from dividends that accrued interest, from values in a Premium Deposit Fund or from interest paid on a claim or policy/contract surrender.
Interest income not included in Box 3
This is the total policy/contract interest paid during the calendar year.
Early withdrawal penalty
This shows the interest or principal forfeited because of early withdrawal.
Federal income tax withheld
Tax withholding is an amount of money withheld from distributions and paid to the government towards the policy/contract owner's current tax year liabilities. The owner may request withholding on distributions; withholding may also be mandated based on the status of a current policy/contract.
Information in this box refers to backup withholding. If you do not provide a taxpayer identification number (TIN) or have provided an incorrect TIN, a payer must backup withhold at a rate of 28%. To provide or correct a TIN, please complete an IRS Form W9.
Answers to frequently asked tax questions
If you believe the information on your Form 1099 is incorrect, please contact your Tax Advisor. If after review, you and your advisor believe that an error has occurred, please contact us. Nassau will research the appropriate information for your policy/contract and send you an explanation. If a change needs to be made, Nassau will send you a corrected Form 1099. Please note that if the policy/contract was issued as an 1035 exchange, we may not have received the necessary information from the previous carrier. In this case, you would need to contact the carrier(s) and have the information sent to Nassau.
Corrections to your Tax Identification Number/Social Security Number must be submitted on a signed Form W9. This form is available on the Web at www.IRS.gov or by contacting Nassau. Upon receipt of Form W9, Nassau will make the necessary corrections.
If at the time your policy lapsed there was an outstanding loan and a taxable gain, you would receive a Form 1099-R. While a policy is active, generally any cash loans or loans to pay premiums would be considered non-taxable. When a policy terminates or lapses, any outstanding loan on a policy with a gain is considered a distribution and becomes a taxable event.
You may receive multiple Form 1099-Rs if you took distributions for more than one type of product, the distribution code is not the same, or there are different service phone numbers. For example, if you took a distribution from your life insurance policy and from your annuity contract, you would receive more than one Form 1099-R. Also, if you took a distribution which has a distribution code of 7 (normal distribution) and another with a distribution code of 1 (early distribution), this would result in the issuance of more than one Form 1099-R, regardless of product.
Nassau is required to report all exchanges processed under Section 1035 of the Internal Revenue Code (IRC). In most instances, these exchanges are reported as non-taxable events. As a result, the taxable amount field would be left blank. You can verify this by referring to the Distribution code(s) (Box 7) on the form.
An exchange may be taxable, if at the time of the exchange, there was a loan and a gain. The taxable amount would be the lesser of the two. For example, if at the time of the exchange the gain is $5,000 and the loan balance is $6,000, the gain of $5,000 would be reportable as a taxable gain. If, at the time of the exchange, the loan was transferred over to the new contract/policy, the exchange would remain a non-taxable event. Contact Nassau to request a corrected Form 1099-R.
Nassau is required to report all exchanges processed under Section 1035 of the Internal Revenue Code (IRC). In most instances, these exchanges are reported as non-taxable events. This can be verified by referring to the Distribution code (Box 7) on your Form 1099.
Your Form 1099-R should show a taxable amount of zero. If you believe your taxable amount should be zero, please contact us.
A direct rollover from one IRA to another IRA is not reportable on Form 1099-R.
Although you may not have taken any distributions, you may receive a 1099… If the owner of the contract is an entity other than an individual (a corporation, for example), the contract loses its annuity status for tax purposes, and, in general, the gain is reportable each year. 2) If the ownership on a contract is changed, any gain at the time of the ownership change is taxable and reportable to the previous owner.
You should submit IRS Form 8606 with your tax return to report any after-tax contributions you may have made to your IRA.
Please consult your Tax Advisor to confirm the distribution code shown is correct. If it is determined that the distribution code is incorrect, please contact us to request an updated 1099-R.
If your loan defaulted during the year, generally this results in a taxable event and you would receive a Form 1099-R.