Form 1099-SB 2025: Seller’s Investment in Life Insurance Contract
Form 1099-SB reports transfers of life insurance contracts under IRC Section 6050Y, which governs reportable policy sales and transfers to foreign persons. The April 2025 revision clarifies that Copy A remains scannable only when printed from official IRS stock. Filers downloading and printing Copy A from the IRS website must order scannable copies to maintain filing compliance for tax year 2025.
This distinction directly affects filing compliance because the IRS requires scannable copies of Form A for processing. Penalties may apply for filing non-scannable Copy A forms that have been downloaded and printed locally.
Preparation Steps
Step 1: Verify Reporting Requirements
Confirm the life insurance contract qualifies as a reportable policy sale under Section 6050Y or involves transfer to a foreign person. Verify the transfer occurred during calendar year 2025 and determine whether you are the issuer, not the seller. Under Section 6050Y, the issuer is any person that bears any part of the risk with respect to a life insurance contract and any person responsible for administering the contract.
Step 2: Obtain Seller Information
Obtain the seller's complete TIN, which may be an SSN, ITIN, ATIN, or EIN. Collect the seller's current legal name and mailing address—match seller identification to the life insurance policy transfer documentation to ensure accuracy across all reporting forms.
Step 3: Calculate Investment in Contract
Calculate investment in contract for Line 1 using the definition in Regulations section 1.6050Y-1(a)(7). For the original policyholder, investment in the contract means the aggregate amount of premiums or other consideration paid for the contract, less the aggregate amount received under the agreement, to the extent that such amount was excludable from gross income.
For any other person, use the estimate of investment in the contract, which is the aggregate amount of premiums paid by that person less amounts received, to the extent such information is known to or can reasonably be estimated by the issuer. This regulatory definition modifies the general IRC Section 72(e)(6) definition to account for the issuer's knowledge limitations regarding non-original policyholders.
Step 4: Calculate Surrender Amount
Calculate surrender amount for Line 2 as the amount the seller would have received from the issuer responsible for administering the life insurance contract if the seller had surrendered the life insurance contract to the issuer on the date of the reportable policy sale or the transfer of the contract to a foreign person. This amount should be obtained from your policy records or actuarial determination for the specific policy transferred in 2025. Note that the regulations do not provide an alternative calculation method when no surrender option exists.
Step 5: Complete Policy and Issuer Information
Enter the correct policy number assigned to the transferred life insurance contract. Verify accuracy against policy records and transfer documentation to ensure proper identification: complete issuer TIN, issuer name, and issuer address information in the header section. Include the telephone number and, if applicable, separate the contact name and address information. The issuer's information contact name must be provided in the appropriate box, and this individual must be familiar with the reporting requirements of reportable policy sales.
Step 6: Address Corrections
Select the CORRECTED checkbox only if reissuing Form 1099-SB to correct errors on a prior 2025 filing. Do not use this checkbox for duplicate filings or routine copies. If a reportable policy sale or transfer of an insurance contract to a foreign person is rescinded after filing, you must file a corrected Form 1099-SB within 15 calendar days of receipt of notice of the rescission.
Step 7: Confirm Electronic Filing Requirements
Confirm that if you are filing 10 or more Forms 1099-SB for 2025, you meet electronic filing requirements per current IRS guidance. The Taxpayer First Act of 2019 authorized the Department of the Treasury and the IRS to issue regulations that reduce the 250-return electronic filing threshold. Treasury Decision 9972, published February 23, 2023, lowered the electronic filing threshold to 10 information returns, calculated by aggregating all information returns, effective for information returns required to be filed on or after January 1, 2024.
If filing fewer than 10 on paper, order official scannable Copy A from IRS.gov/EmployerForms.
2025-Specific IRS Updates
Scannable Copy Requirements
The April 2025 revision emphasizes that Copy A downloaded from IRS.gov and printed locally is NOT scannable. Penalties may apply for filing non-scannable Copy A forms. Filers must order official printed forms with scannable Copy A from IRS.gov/EmployerForms to maintain compliance with IRS processing requirements.
Section 6050Y Reporting Requirements
Section 6050Y reporting requirements, which are in effect for transfers occurring in 2025, require both reportable policy sales and transfers to foreign persons to be reported. Confirm the transfer type matches the form purpose before filing. A reportable policy sale is any direct or indirect acquisition of any interest in a life insurance contract if the acquirer, at the time of acquisition, has no substantial family, business, or financial relationship with the person insured under that contract.
Copy Distribution Rules
Copy B and other copies may be downloaded, printed, and distributed to sellers. Only Copy A, which is for IRS filing, must originate from official IRS stock. This distinction allows flexibility in providing statements to recipients while maintaining IRS processing standards for forms submitted to the agency.
Penalties and Compliance
The General Instructions for Certain Information Returns, referenced in the current form instructions, govern penalties for non-scannable filings, compliance with the Privacy Act, and Paperwork Reduction Act notices. Consult that publication for 2025-year-specific penalty thresholds and filing deadlines. The IRS may impose penalties under Section 6721 for failure to file correct information returns by the due date and under Section 6722 for failure to furnish correct payee statements.
Filing Deadlines and Methods
Returns required under these provisions must be filed with the Internal Revenue Service Center designated on the prescribed form or in its instructions on or before February 28 (March 31 if filed electronically) of the year following the calendar year in which the reportable policy sale or transfer to a foreign person occurred. Statements to sellers must be furnished on or before February 15 of the year following the calendar year in which the transaction occurred.
Electronic filing through the Information Reporting Intake System (IRIS) or the Filing Information Returns Electronically (FIRE) system is available for qualifying filers. IRIS is a free online portal that enables taxpayers to file information returns for tax years 2022 and later electronically.
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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.
