Filling Out A W-9 For Life Insurance Simplified

A W-9 form is a tax form used to confirm a person's name, address, and taxpayer identification number (TIN) for employment or income-generating purposes. While the benefit for a life insurance policy is non-taxable, the interest may be taxable if it exceeds $600. Therefore, all U.S. beneficiaries are required to fill out a W-9 form to comply with tax regulations.

How to fill out a W-9 for life insurance as a self-employed worker

As a self-employed worker, you will need to fill out a W-9 form to provide your taxpayer information for income reporting. This is used by the person or business paying you to accurately prepare a 1099 form and report the payments they make to you at the end of the year.

Step 1: Enter your name and business name

Enter your name as shown on your tax return. If you are doing business under a different name, such as a "doing business as" (DBA) name, enter that on the second line.

Step 2: Select your federal tax classification

Select the appropriate box for your federal tax classification. This could be sole proprietorship, partnership, C corporation, S corporation, trust/estate, or limited liability company. Only select one classification. If you are unsure, the IRS provides a summary table for guidance.

Step 3: Provide your address

Enter your street address, city, state, and ZIP code. Use the address that you will use on your tax return. This is typically the address where the person or business will mail your 1099 form.

Step 4: Account number (optional)

If needed, provide the requester's name and your account number. This section is optional but can be used to uniquely identify you within the requester's system.

Step 5: Taxpayer Identification Number (TIN)

Provide your TIN, which is typically your Social Security Number (SSN) if you are a sole proprietor. If you are another type of business, such as a multi-member LLC, your TIN will be your Employer Identification Number (EIN).

Step 6: Certification

In this section, you will need to certify that the information you have provided is accurate. You will also need to certify that you are a U.S. citizen, another type of U.S. person, or a resident alien. If you are subject to backup withholding, you will need to cross out Item 2 in this section.

By signing and dating the form, you are declaring that the information provided is true and correct to the best of your knowledge.

Remember to return your completed W-9 form to the business that requested it. It is recommended to deliver it in person or by secure methods such as encrypted email to protect your personal information.

Why life insurance companies ask for a W-9

A W-9 form is a standard legal document used to collect a person's Tax Identification Number (TIN) or EIN number. It is used to confirm a person's name, address, and TIN for employment or other income-generating purposes.

The W-9 form is required for US citizens or resident aliens who will receive compensation as a non-employee, including independent contractors, freelancers, or self-employed individuals. It is also required for individuals who will collect interest, receive proceeds from a real estate transaction, pay mortgage interest, pay student loan interest, or have debt cancelled.

In the context of life insurance, a W-9 form is required for all US beneficiaries to comply with tax regulations. While the benefit from a life insurance policy is non-taxable, the interest may be taxable if it exceeds $600. Even if the interest amount is less than $600, a W-9 form is still required.

The W-9 form allows insurance companies to identify the provision of healthcare services and ensure proper reimbursement to beneficiaries. By collecting the TIN or EIN number, insurance companies can verify the identity and tax status of beneficiaries, facilitating accurate tax reporting and compliance with legal requirements.

When life insurance is taxable

Life insurance proceeds are generally not considered taxable income. When a policyholder passes away, the death benefits are paid to the beneficiary or beneficiaries, and this payout is typically tax-free. However, there are certain scenarios in which life insurance proceeds can be taxed. Here are some instances in which life insurance proceeds may be taxable:

• Payout structure: While a lump-sum payout is usually tax-free, if the payout is structured as multiple payments, these payments can be subject to taxes. This includes annuities, which are paid regularly over the life of the beneficiary and can consist of both proceeds and interest.
• Withdrawal or loan against the policy: Some life insurance policies, such as whole life insurance, accumulate cash or interest over time. If the policyholder withdraws or takes out a loan for an amount greater than the total premiums paid, the excess may be taxable.
• Surrendering the policy: If you surrender a life insurance policy, the amount you receive is typically considered a tax-free return of your principal. However, any amount above your policy's cash basis will be taxed as regular income.
• Employer-paid group life plan: In certain cases, an employer-paid plan that pays out more than $50,000 may be taxable, according to the Internal Revenue Service (IRS).
• Estate taxes: If the life insurance proceeds are included as part of the deceased's estate, and the total value exceeds the federal estate tax threshold (which was $12.92 million as of 2023), estate taxes must be paid on the proceeds that exceed the allowed limit.
• Interest on proceeds: Although the life insurance benefit itself may not be taxable, any interest earned on the proceeds is generally taxable and should be reported. This applies if the interest exceeds $600, but a W-9 form is required even if the interest is below this threshold.

How to fill out a W-9 for a beneficiary

As a beneficiary of a life insurance policy, you are required to fill out a W-9 form to comply with tax regulations. The benefit amount for a life insurance policy is non-taxable, but any interest income may be taxable. The W-9 form is used to confirm your name, address, and taxpayer identification number (TIN) for income-generating purposes. Here is a step-by-step guide on how to fill out the W-9 form as a beneficiary:

• Enter your legal name as shown on your tax return. If you have a business name or a "disregarded entity" name that is different from your legal name, you can include that as well.
• Select the appropriate federal tax classification that applies to you. This could be sole proprietorship, partnership, C corporation, S corporation, trust/estate, limited liability company, or "other." Only select one classification.
• If you are exempt from backup withholding or FATCA reporting, you may need to enter the appropriate code in the relevant boxes.
• Provide your street address, city, state, and ZIP code. Use the address that you will use on your tax return.
• (Optional) You can provide the name and address of the requester. This step can be useful for your records.
• (Optional) You can list any relevant account numbers associated with the life insurance policy or the paying entity.
• Provide your taxpayer identification number (TIN). For most individuals, this will be your Social Security Number (SSN). If you are a business, provide your employer identification number (EIN).
• Certify that all the information provided is true and correct. This step is very important, as providing false information can result in serious consequences, including fines or jail time.
• Sign and date the W-9 form.
• Return the completed form to the insurance company or the appropriate entity that requested it. If possible, deliver it in person or by secure mail to protect your personal information.

Remember that filling out the W-9 form is necessary to receive your life insurance benefit and to comply with tax regulations. Take your time, provide accurate information, and seek clarification from a tax professional or the IRS if needed.

What to do if someone won't give you a W-9

A W-9 form is used to confirm a person's name, address, and taxpayer identification number (TIN) for employment or other income-generating purposes. While it is required by the IRS, there are no repercussions for refusing to fill one out. However, if you don't have a W-9 form for someone you've paid, you must request one. If they refuse to provide one, you can still process a year-end Form 1099-MISC, reporting all income to the vendor. You must then start withholding federal taxes immediately to ensure that all appropriate taxes are paid for the work. This will help the IRS identify those who don't report income.

If someone won't give you a W-9, you should ask them why they don't want to fill it out. They may have privacy concerns or be worried about identity theft. You could suggest that they deliver the form in person or encrypt the document if sending it via email. You could also ask for a letter from their CPA or attorney explaining why they believe it is unnecessary for them to complete a W-9 form.

If you are unable to obtain a W-9 form from someone you have paid, you must still submit the required 1099 forms. You can leave the TIN/SSN field blank or write "Refused to Provide". The IRS will then send a notice requiring you to begin backup withholding with a CP-2100 or CP-2100A letter. You are required to make at least three attempts to obtain the information and document all attempts to avoid penalties from the IRS.

If you are the one refusing to give a W-9 form, be aware that the company may start withholding taxes from your earnings at a rate of 24%. Additionally, there are penalties and fees for intentionally failing to furnish correct information or misusing TINs.

Frequently asked questions