Form 1099-LS 2025 Tax Year Checklist
Purpose and Overview
Form 1099-LS reports sales of life insurance contracts that must be reported under IRC Section 6050Y. Acquirers must furnish this information in return for payment recipients, issuers, and the IRS within specified timeframes. Payment recipients are required to report the amounts received on their tax return. Failure to report income may result in accuracy-related penalties or other consequences.
Who Must File
File Form 1099-LS if you are the acquirer of any interest in a life insurance contract in a reportable policy sale. An acquirer is any person who acquires an interest in a life insurance contract, either directly or indirectly, in a reportable policy sale. In general, a reportable policy sale occurs when the acquirer has no substantial family, business, or financial relationship with the insured person, apart from the acquirer’s interest in the life insurance contract.
You may qualify for an exception if the interest was transferred to you gratuitously, if you are a foreign person, if you report reportable policy sale payments under Section 6041 or 6041A, if you acquire a contract in a Section 1035 exchange, or if another acquirer or third-party information reporting contractor reports on your behalf under unified reporting provisions.
Filing Requirements and Electronic Filing Threshold
As of January 1, 2024, filers with 10 or more information returns in aggregate must file electronically. This threshold applies to all information returns combined, not just Form 1099-LS. Most filers subject to Form 1099-LS reporting requirements will meet this threshold. They must use electronic filing systems such as the IRS Information Reporting Intake System (IRIS) or the Filing Information Returns Electronically (FIRE) system.
Paper Filing Requirements
If you file fewer than 10 information returns and choose to file on paper, you must use official IRS scannable Copy A forms. The scannable Copy A forms must be ordered from the IRS and cannot be printed from the IRS website. Downloaded versions are not scannable and filing them may result in penalties. Order official forms by visiting www.irs.gov/orderforms or the IRS page at www.irs.gov/businesses/order-paper-information-returns-and-employer-returns.
The standard warning that appears on all IRS information returns states that the official printed version of Copy A is designed to be scanned. Still, the online version printed from the website is not suitable for filing with the IRS. This requirement applies to all tax years, not just 2025.
Required Information Elements
Acquirer Information
Enter your complete name, street address, city, state or province, country, ZIP or foreign postal code, telephone number, and taxpayer identification number (TIN). Additionally, please provide the name, address, and telephone number of your designated information contact, if different from your own. This contact information must provide direct access to a person who can answer questions about the information return.
Payment Recipient Details
Verify and accurately report the payment recipient’s complete TIN, which may be a Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), Adoption Taxpayer Identification Number (ATIN), or Employer Identification Number (EIN). You must report the complete TIN to the IRS on Copy A. You may truncate the TIN to display only the last four digits on Copy B and Copy C for privacy purposes, but the complete number must always be reported to the IRS.
A payment recipient is any person who receives a reportable policy sale payment in a reportable policy sale. This may include any seller in the transaction, as well as any broker or intermediary retaining a portion of the consideration transferred. However, a person other than a seller is not considered a payment recipient if they received aggregate payments of less than $600 with respect to the reportable policy sale.
Policy Number and Issuer Information
Enter the policy number assigned by the life insurance company to the specific life insurance contract. This number is mandatory for matching purposes with IRS records and must correspond to the issuer’s records to prevent reconciliation issues. Identify the issuer’s name, which is the insurance company responsible for administering the life insurance contract, including collecting premiums and paying death benefits, on the date the Form 1099-LS is required to be furnished.
Box 1: Amount Paid to Payment Recipient
Report the total amount paid to the payment recipient in Box 1. This amount must reflect the actual cash or property value transferred in the reportable policy sale. The acquirer is not required to report this information to the issuer of the life insurance contract on Copy C, making this entry optional on the issuer copy.
Box 2: Date of Sale
Enter the date of sale in Box 2 using the calendar year format. This date must correspond to the acquisition date of the reportable life insurance contract and establishes the tax year for reporting purposes.
Statement Furnishing Requirements
Copy B for Payment Recipient
Furnish Copy B to the payment recipient by the due date specified in the General Instructions for Certain Information Returns. Copy B includes the statement that this is important tax information and is being furnished to the IRS. The statement warns the recipient that failure to report required items on their tax return may result in consequences. However, the specific language does not invoke technical penalty terms such as “negligence penalties.”
Copy C for Issuer
Furnish Copy C to the issuer if your acquisition is a direct acquisition and the form relates to the seller. Direct the statement to the administrative office that processes transfers of ownership pursuant to the life insurance contract. Reporting the amount paid to the payment recipient is optional on Copy C. You may not need to furnish statements to the payment recipient and issuer if another acquirer or third-party information reporting contractor reports on your behalf under unified reporting provisions.
Form Copies and Distribution
For tax year 2025, Form 1099-LS consists of three copies: Copy A for filing with the IRS, Copy B for the payment recipient, and Copy C for the issuer. Copy D has been discontinued, effective with the 2025 tax year, as part of the IRS’s initiative to reduce filer burden. Filers should retain Copy C or maintain their records for documentation purposes.
Issuer Reporting Obligations
When the issuer receives Copy C of Form 1099-LS, the issuer must file Form 1099-SB under IRC Section 6050Y(b). Form 1099-SB is titled “Seller’s Investment in Life Insurance Contract” and reports the seller’s investment in the contract and the surrender amount. This form is distinct from other information returns and specifically addresses life insurance contract transactions.
Filing Methods and Systems
Electronic Filing Options
Electronic filers must use either the IRIS system or the FIRE system. The IRIS system is a free online portal available through the IRS website that allows taxpayers to electronically file information returns. The FIRE system requires software that generates files meeting Publication 1220 specifications for electronic filing of information returns.
Paper Filing with Form 1096
If filing on paper, submit Copy A with Form 1096 (Annual Summary and Transmittal of U.S. Information Returns) to the appropriate IRS Submission Processing Center. Form 1096 serves as the transmittal form for paper information returns and must accompany all paper submissions of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G.
Corrected Returns
Mark the “CORRECTED” box on all copies if reporting a correction to a previously filed Form 1099-LS for the same policy and payment recipient. File corrected returns by the standard deadline. If a reportable policy sale is rescinded after filing Form 1099-LS, you must file a corrected form within 15 calendar days of receiving notice of the rescission.
If you furnished statements to the payment recipient or issuer, you must furnish corrected statements within 15 calendar days of receiving notice of the rescission.
Payment Recipient Tax Reporting
Payment recipients are required to report the transaction on their tax return. The gain or loss calculation follows Section 1001 rules, using the amount shown in Box 1 as proceeds and adjusting for the recipient’s adjusted basis in the contract and any excludable death benefit proceeds per Section 101(a). Form 1099-LS does not provide basis or death benefit information, so recipients must maintain these records separately.
Recipients may report proceeds as ordinary income in the “Other Income” section of Form 1040 or as capital gains on Schedule D, depending on the nature of the transaction and applicable tax rules.
Verification Before Filing
Before filing, verify that the sale qualifies as reportable under Section 6050Y. Confirm that the acquisition involves a life insurance contract or interest where the transferor receives payment, the acquirer is not the issuer, and the contract is not exempt under Treasury Regulations Section 1.6050Y-1. Ensure all required information is accurate and complete, including taxpayer identification numbers, dates, amounts, policy numbers, and issuer details.
Exceptions and Special Situations
Review Treasury Regulations Section 1.6050Y-2(f) to determine if you qualify for an exception to filing requirements. Exceptions may apply for specific circumstances involving foreign persons, gratuitous transfers, alternative reporting under other code sections, or Section 1035 exchanges. The unified reporting provisions under Regulations Section 1.6050Y-2(b) may allow another acquirer or third-party contractor to report on your behalf.
General Instructions Reference
The General Instructions for Certain Information Returns govern filing due dates, electronic reporting requirements, corrected and void returns, statements to recipients, taxpayer identification number requirements, backup withholding, and penalties. These instructions apply to Form 1099-LS and provide comprehensive information about information return filing procedures. The instructions are updated periodically and are designated for use with tax year 2025 and subsequent years until superseded.
Penalties and Compliance
Failure to file correct information returns by the due date may result in penalties under Section 6721. Failure to furnish correct payee statements may result in penalties under Section 6722. Penalties vary based on how late the forms are filed or furnished, with higher penalties for intentional disregard of filing or statement requirements. Filing non-scannable paper forms when scannable forms are required may also result in penalties.
Record Retention
Maintain adequate records to support the information reported on Form 1099-LS. While the IRS no longer provides Copy D, filers should retain Copy C or create their own documentation for their records. Keep records for at least four years from the filing date to support the information reported in case of IRS inquiries or audits.
Additional Resources
Consult the Instructions for Form 1099-LS (Rev. April 2025) for specific guidance on reporting requirements under Section 6050Y. These instructions are designated as continuous-use instructions for tax year 2025 and subsequent years until a superseding revision is issued. Treasury Regulations Sections 1.6050Y-1, 1.6050Y-2, and 1.6050Y-3 contain the complete regulatory framework for reportable policy sales. The current General Instructions for Certain Information Returns provide comprehensive information about filing procedures applicable to all information returns.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
