I want to surrender my life insurance policy and received a check for the surrender value. The interest accrued over the years will be reported to the IRS. I'm willing to pay the taxes. I just don't want it reported for personal reasons. Can the insurance company withhold the taxed portion of the accrued interest instead
It's GOING to be reported by the IRS. Even if they withhold the tax, it gets reported.
However. You only have to pay TAXES on it, if the total amount you get out, in cash surrender value, is MORE than you paid over the years, for the life insurance.
If you've had the policy a very, very long time, it's possible. If you haven't had it very long, it's not likely at all. And you only pay taxes on the 'gain'.
That means, if you've paid $1000 a year for 10 years, if the surrender value is less than $10,000, no taxes. But you'd pay tax for every dollar OVER $10,000.
When you surrender the policy the distribution is taxable. The amount your taxed on is limited to the “gain” in the policy, which generally equals the policy’s cash surrender value less the premiums paid. No way around that.
Is there any cash value in the policy? If so you could take out a loan up to the cash value without having to surrender the policy and pay income tax.
It's GOING to be reported by the IRS. Even if they withhold the tax, it gets reported.
However. You only have to pay TAXES on it, if the total amount you get out, in cash surrender value, is MORE than you paid over the years, for the life insurance.
If you've had the policy a very, very long time, it's possible. If you haven't had it very long, it's not likely at all. And you only pay taxes on the 'gain'.
That means, if you've paid $1000 a year for 10 years, if the surrender value is less than $10,000, no taxes. But you'd pay tax for every dollar OVER $10,000.
When you surrender the policy the distribution is taxable. The amount your taxed on is limited to the “gain” in the policy, which generally equals the policy’s cash surrender value less the premiums paid. No way around that.
Is there any cash value in the policy? If so you could take out a loan up to the cash value without having to surrender the policy and pay income tax.
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