IRS Instruction 1099-SB – IRS Forms, Instructions, Pubs 2026 – Life insurance policy sales, viatical settlements, and life settlements have grown significantly. When a life insurance contract (or interest in one) is transferred in a reportable policy sale or to a foreign person, the issuer must report specific details to the IRS and the seller.
Form 1099-SB, “Seller’s Investment in Life Insurance Contract,” handles this reporting. These official IRS instructions (Rev. April 2025) explain everything issuers need to know.
What Is Form 1099-SB and Why Does It Exist?
The IRS uses Form 1099-SB so sellers and the IRS can correctly determine taxable gain (or loss) when a life insurance policy is sold or transferred.
It reports two key amounts:
- Box 1 — Seller’s investment in the contract (basis)
- Box 2 — Surrender amount (what the seller would have received if they surrendered the policy on the transfer date)
This information helps the seller calculate gain under IRC Section 72 when they later file their tax return. The form also supports the buyer’s reporting on Form 1099-LS (Reportable Life Insurance Sale).
Key definition – Reportable Policy Sale
A reportable policy sale is any direct or indirect acquisition of an interest in a life insurance contract by a buyer who has no substantial family, business, or financial relationship with the insured person (other than the policy itself).
Exceptions exist; see Regulations section 1.101-1(c)(2) for details. Indirect acquisitions (e.g., buying an interest in a partnership or trust that owns the policy) can also trigger reporting.
Who Must File Form 1099-SB?
You (as the issuer) must file Form 1099-SB if either of these occurs:
- You receive a statement from an acquirer under section 6050Y(a) — typically a copy of Form 1099-LS showing a reportable policy sale.
- You receive notice (from any source other than the administering issuer) of a transfer of the life insurance contract to a foreign person.
Exceptions
- You are not the issuer responsible for administering the contract (collecting premiums and paying benefits) and you promptly forward the notice and available information to the responsible issuer.
- The seller is a foreign beneficial owner (certain conditions).
- Unified reporting or third-party contractor rules apply (Regulations section 1.6050Y-3).
- The transfer is a section 1035 exchange reported as a reportable policy sale (specific conditions).
You must file a separate Form 1099-SB for each seller involved.
When and Where to File (2025 Returns)?
To the IRS
- Paper filing: Generally due March 2, 2026.
- Electronic filing (required if you file 10+ information returns in aggregate): Due March 31, 2026.
- See Regulations section 1.6050Y-3(c) for any special exceptions.
To the Seller (Copy B)
- Generally due February 17, 2026.
- If notice of a transfer to a foreign person is received after February 2, 2026 → due 30 days after receipt of the notice.
Use the current General Instructions for Certain Information Returns for full details on e-filing (IRIS system), corrected returns, and penalties.
How to Complete Form 1099-SB – Step-by-Step?
Issuer Information
Enter your name, address, telephone number, and TIN. Include an information contact person (name and phone) who can answer IRS questions.
Seller Information
- Seller’s name, address, and TIN (you may truncate the TIN on Copy B furnished to the seller).
- Policy Number — The unique number assigned by the issuer responsible for administering the contract.
Box 1 – Investment in Contract
Enter the seller’s investment in the contract.
- For the original policyholder: Aggregate premiums paid minus excludable amounts received.
- For any other seller: Use the best available information or reasonable estimate of premiums paid minus amounts received (only to the extent known or reasonably estimable by the issuer).
Box 2 – Surrender Amount
Enter the amount the seller would have received if they had fully surrendered the contract to the issuer on the date of the reportable policy sale (or transfer to a foreign person).
Statement to the Seller (Copy B)
You must furnish Copy B (or an acceptable substitute) to the seller.
- Online fillable Copy B is available at IRS.gov/Form1099SB.
- The form must prominently display the tax year, form number, and form name.
- Include your information contact details.
Special Rules
Rescission of a Reportable Policy Sale
If the sale or foreign transfer is rescinded, file a corrected Form 1099-SB and furnish a corrected statement to the seller within 15 calendar days of receiving notice of the rescission.
Transfers to Foreign Persons
Any notice containing foreign indicia (address change, premium notices, etc.) can trigger reporting unless you know the transferee is a U.S. person or that no transfer occurred.
Penalties
Standard information-return penalties apply for failure to file, furnish statements, or include correct information. See the General Instructions for amounts and reasonable-cause relief.
Common Questions (FAQ)
Who receives Form 1099-SB?
Only the seller (policy owner who transferred the contract). The buyer does not receive this form.
Is Form 1099-SB the same as Form 1099-LS?
No.
- 1099-LS → filed by the acquirer/buyer (reports the purchase price).
- 1099-SB → filed by the issuer (reports seller’s basis and surrender value).
Do I need to file if the policy was surrendered normally?
No — only for reportable policy sales or transfers to foreign persons.
Where can I get the official form and instructions?
- Instructions (Rev. April 2025): IRS.gov/pub/irs-pdf/i1099sb.pdf
- Form 1099-SB: IRS.gov/pub/irs-pdf/f1099sb.pdf
- Latest updates: IRS.gov/Form1099SB
Final Tips for Compliance
- Act quickly when you receive a 1099-LS or foreign-transfer notice.
- Maintain clear records of how you calculated the seller’s investment (especially for non-original owners).
- Use the online fillable Copy B to simplify furnishing statements.
- Consider e-filing through the IRIS system if you file 10 or more information returns.
- Consult the full Regulations under section 6050Y and the General Instructions for Certain Information Returns for edge cases.
This article is based directly on the official IRS Instructions for Form 1099-SB (Rev. April 2025) and related publications. Always verify the most current version at IRS.gov, as rules can change. For personalized tax advice, consult a qualified tax professional or the issuer’s legal/compliance team.
Need help with related forms? See our guides on Form 1099-LS and life settlement tax reporting.
Last updated: February 2026