IRS Form 1099-SB – In the world of taxes and life insurance, certain transactions require specific reporting to ensure compliance with IRS rules. One such document is IRS Form 1099-SB, officially titled “Seller’s Investment in Life Insurance Contract.” This form plays a crucial role when a life insurance policy is sold or transferred, helping both the seller and the IRS track the financial details for accurate tax calculations. Whether you’re a policyholder considering selling your life insurance or an issuer handling these transactions, understanding Form 1099-SB is essential to avoid penalties and ensure proper reporting.
This guide breaks down everything you need to know about Form 1099-SB, including its purpose, who must use it, key components, and tax implications. We’ll draw from official IRS guidelines to provide accurate, up-to-date information as of 2026.
What Is IRS Form 1099-SB and Why Does It Matter?
Form 1099-SB is an information return used by life insurance issuers (typically insurance companies) to report the seller’s investment in a life insurance contract. It comes into play during a “reportable policy sale” under section 6050Y of the Internal Revenue Code or when the contract is transferred to a foreign person. A reportable policy sale generally occurs when someone sells or transfers their interest in a life insurance policy to a third party for valuable consideration, such as in a viatical settlement or life settlement.
The form’s primary purpose is to disclose the cost basis of the policy—essentially, how much the original owner has invested. This information is vital for determining any taxable gain if the policy is sold or later surrendered. Without it, sellers might overpay or underpay taxes, and the IRS lacks visibility into these transactions. Introduced as part of broader tax reforms, Form 1099-SB ensures transparency in life insurance sales, which were previously underreported.
For example, if you’ve held a life insurance policy for years and decide to sell it due to changing financial needs, the buyer (acquirer) will report the acquisition using Form 1099-LS. In turn, your insurance company will issue you Form 1099-SB to detail your investment. Receiving this form doesn’t automatically mean you owe taxes—it’s about providing the data to calculate potential gains.
Who Needs to File or Receive Form 1099-SB?
Who Files It?
- Issuers of Life Insurance Contracts: Insurance companies or other entities responsible for administering the policy must file Form 1099-SB with the IRS. Filing is required if they receive a statement from an acquirer (like Form 1099-LS) in a reportable policy sale or notice of a transfer to a foreign person.
- A separate form is needed for each seller involved in the transaction.
Who Receives It?
- Sellers of Life Insurance Policies: If you’ve sold or transferred your policy in a qualifying transaction, you’ll get Copy B of the form from the issuer. This helps you report any taxable income on your tax return.
- The IRS also receives a copy to cross-check reported income.
Note: If you’re the acquirer (buyer), you won’t receive this form—you’ll file Form 1099-LS instead.
Due Dates for 2026
- To Recipients (Sellers): Generally, February 17, 2026. However, if the issuer receives late notice of a foreign transfer (after February 2, 2026), it’s due 30 days after receipt.
- To the IRS: March 2, 2026 (paper filing) or March 31, 2026 (electronic filing). E-filing is required if submitting 10 or more forms.
Key Components of Form 1099-SB
Form 1099-SB is straightforward, with fields for identifying information and two main financial boxes. Here’s a breakdown based on the latest revision (April 2025):
| Section | Description |
|---|---|
| Issuer’s Information | Name, address, phone number, and Taxpayer Identification Number (TIN). |
| Seller’s Information | Your name, address, and TIN (often showing only the last four digits for privacy). |
| Policy Number | The unique identifier assigned by the insurance company to the transferred contract. |
| Box 1: Investment in Contract | The issuer’s estimate of your total investment, calculated as aggregate premiums paid minus any excludable amounts received (per section 72(e)(6)). This is your cost basis. |
| Box 2: Surrender Amount | The amount you would have received if you surrendered the policy on the sale date. |
| Issuer’s Contact (if different) | Additional contact details for questions about the form. |
The form includes notes on privacy (e.g., TIN masking) and references to IRS resources for future updates. Copy A is for the IRS (red ink, scannable), while Copy B is for you (black ink).
How to Fill Out Form 1099-SB (For Issuers)?
If you’re an issuer, follow these steps from the official instructions:
- Gather Data: Use the seller’s statement from the acquirer (e.g., Form 1099-LS) to confirm the transaction.
- Enter Identifying Info: Fill in names, addresses, TINs, and policy number.
- Box 1: Calculate the investment as premiums paid minus excludable receipts.
- Box 2: Determine the surrender value as of the sale date.
- File Electronically or by Paper: Use IRS FIRE system for e-filing if required.
- Furnish to Seller: Send Copy B by the due date.
Corrected forms can be filed if errors are discovered—mark the “CORRECTED” box.
Tax Implications for Sellers: Do You Owe Taxes?
Receiving Form 1099-SB signals a potential taxable event. The gain from selling your policy is calculated as:
- Sale Proceeds (from Form 1099-LS) minus Your Investment (Box 1 from Form 1099-SB).
This gain is typically treated as ordinary income, not capital gains. However:
- If the policy was term life (no cash value), there might be no gain.
- Viatical settlements for terminally ill individuals may be tax-free.
- Consult a tax professional, as rules can vary based on your situation.
Report any taxable amount on your Form 1040, Schedule 1 (Additional Income and Adjustments to Income).
How to Obtain Form 1099-SB?
- Download the PDF: Get the latest version (Info Copy Only) from the IRS website at https://www.irs.gov/pub/irs-pdf/f1099sb.pdf.
- Official Instructions: Available at https://www.irs.gov/instructions/i1099sb.
- Order Printed Copies: Via IRS.gov/EmployerForms for scannable versions.
For e-filing software or help, check IRS-approved vendors.
Common FAQs About IRS Form 1099-SB
What if I don’t receive Form 1099-SB?
Contact your insurance issuer immediately. You’re still responsible for reporting the transaction based on your records.
Is Form 1099-SB the same as other 1099 forms?
No—it’s specific to life insurance sales. Unlike 1099-INT (interest) or 1099-MISC (miscellaneous income), it focuses on policy investments.
Can I file Form 1099-SB myself?
Only issuers file it. As a seller, use the info for your personal tax return.
What happens if there’s an error on the form?
The issuer can file a corrected version. Notify them promptly.
For more details, visit IRS.gov or consult a tax advisor. Staying informed about forms like 1099-SB can help you navigate life insurance transactions smoothly and compliantly. If you’re planning a policy sale, factor in these reporting requirements to avoid surprises come tax time.