IRS Form 1099-LS – Reportable Life Insurance Sale (Info Copy Only)

IRS Form 1099-LS – In the world of tax reporting, certain transactions involving life insurance policies can trigger specific IRS requirements. If you’ve been involved in selling or acquiring a life insurance contract, you might encounter IRS Form 1099-LS, also known as the Reportable Life Insurance Sale form. This form plays a crucial role in ensuring transparency and compliance with tax laws under section 6050Y of the Internal Revenue Code. Whether you’re an acquirer, seller, or simply curious about the process, this guide breaks down everything you need to know about Form 1099-LS, including its purpose, filing requirements, and key updates for 2026.

What Is IRS Form 1099-LS?

IRS Form 1099-LS is an information return used to report the acquisition of a life insurance contract—or any interest in such a contract—in what the IRS defines as a “reportable policy sale.” This typically occurs when someone buys a life insurance policy from its original owner, and the buyer (acquirer) has no substantial family, business, or financial relationship with the insured person, aside from the policy itself.

The form doesn’t necessarily mean you’ll owe taxes—it’s primarily for reporting purposes. However, the information reported on Form 1099-LS can lead to tax implications for the seller, who may receive a related Form 1099-SB from the insurance issuer to calculate any taxable gain. Introduced as part of changes from the Tax Cuts and Jobs Act, this form helps the IRS track viatical settlements and life settlements, where policies are sold for cash before the insured’s death.

Key elements of the form include:

  • Acquirer’s Information: Name, address, TIN (Taxpayer Identification Number), and contact details.
  • Payment Recipient’s Information: Details about the seller or any intermediary receiving payment.
  • Box 1: Amount paid to the payment recipient (optional on some copies).
  • Box 2: Date of the sale.
  • Policy Number and Issuer’s Name: Identifies the specific life insurance contract and the company responsible for it.

You can download the official Info Copy Only version of Form 1099-LS directly from the IRS website: https://www.irs.gov/pub/irs-pdf/f1099ls.pdf. Note that this is for informational purposes; official filings require scannable forms ordered from the IRS.

Who Needs to File Form 1099-LS?

The responsibility for filing Form 1099-LS falls on the acquirer—the person or entity purchasing the life insurance contract in a reportable policy sale. This includes direct buyers or those acquiring indirectly through entities like partnerships or trusts.

You do not need to file if:

  • The transfer is gratuitous (e.g., a gift).
  • It’s a section 1035 exchange (tax-free policy exchange).
  • The acquirer is a foreign person not engaged in U.S. trade or business.
  • Another party handles the reporting under unified rules.

Sellers (payment recipients) receive Copy B of the form and may need to report any gain on their tax return using Form 1099-SB. The insurance issuer gets Copy C and uses it to issue Form 1099-SB.

Key Terms and Definitions for Form 1099-LS

To navigate Form 1099-LS effectively, understand these essential terms:

  • Reportable Policy Sale: Any sale or transfer of a life insurance policy where the buyer lacks a close relationship with the insured.
  • Acquirer: The buyer of the policy interest.
  • Payment Recipient: The seller or anyone receiving payment in the transaction (e.g., brokers), excluding those with payments under $600 in aggregate.
  • Issuer: The life insurance company administering the policy and paying death benefits.

These definitions are outlined in IRS Regulations section 1.6050Y and help determine if a transaction qualifies as reportable.

How to Fill Out and File Form 1099-LS?

Filling out Form 1099-LS requires accurate details from the transaction. Use the online fillable PDF for Copies B and C at IRS.gov/Form1099LS. A separate form is needed for each payment recipient.

Steps:

  1. Enter the acquirer’s details, including TIN.
  2. Provide the payment recipient’s name, address, and TIN (truncate on recipient copies for privacy).
  3. Include the policy number, issuer’s name, amount paid (Box 1), and sale date (Box 2).
  4. If applicable, add a separate contact for inquiries.

File electronically via the IRS’s FIRE or IRIS systems if submitting 10 or more returns (threshold effective since 2024). Paper filing is allowed for fewer than 10, sent to the IRS center based on your location.

Filing Deadlines for 2025 Tax Year (Relevant for 2026 Reporting)

  • To IRS: February 28, 2026 (paper) or March 31, 2026 (electronic).
  • To Payment Recipients (Copy B): By February 17, 2026 (adjusted for weekends).
  • To Issuers (Copy C): The later of 20 days after the sale, 5 days after any state rescission period, or January 15, 2026.

If the sale is rescinded, file corrected forms within 15 days of notification.

Penalties for Non-Compliance

Failing to file or furnish Form 1099-LS can result in penalties outlined in the General Instructions for Certain Information Returns. These include fines for late filing, incorrect information, or missing TINs. Always verify TINs using the IRS TIN Matching Program to avoid issues.

  • Form 1099-SB: Issued by the insurance company to the seller to report the seller’s investment basis.
  • General Instructions: Available at IRS.gov/1099GeneralInstructions for broader filing guidance.
  • For the latest updates, visit IRS.gov/Form1099LS. As of early 2026, no major changes have been announced.

Frequently Asked Questions About IRS Form 1099-LS

What if I receive Form 1099-LS as a seller?

It reports the sale, but use Form 1099-SB to calculate any taxable income on your return.

Is every life insurance sale reportable?

No—only those without a substantial relationship between buyer and insured qualify.

Can I e-file Form 1099-LS?

Yes, and it’s required for 10+ returns. Use IRS systems like IRIS.

Where can I get the form?

Download the Info Copy Only PDF here: https://www.irs.gov/pub/irs-pdf/f1099ls.pdf.

Navigating IRS Form 1099-LS doesn’t have to be complicated. By understanding the requirements and using official resources, you can ensure compliance and avoid penalties. If you’re dealing with a life insurance sale, consult a tax professional for personalized advice.