Form 1098-F (Fines, Penalties, and Other Amounts)
- Purpose: Form 1098-F is used to report certain fines, penalties, and other amounts paid to, or required by, a government or governmental entity as a result of a court order or settlement agreement.
- Who Files: Government entities or self-regulatory organizations required to collect fines or penalties typically file this form to report amounts owed by individuals or businesses.
- Recipient’s Responsibility: The recipient (the one paying the fine or penalty) may not necessarily deduct these payments on their taxes, as fines and penalties are usually nondeductible. However, some payments may be deductible if they are compensatory rather than punitive.
- Key Details Reported: Information on the nature of the violation, amounts paid or due, and identifying information of the payer.
Form 1099-LS (Reportable Life Insurance Sale)
- Purpose: Form 1099-LS is used to report the sale of a life insurance policy, where the seller sells the policy to a third-party buyer for valuable consideration.
- Who Files: The buyer of a life insurance policy files this form to report the purchase of the policy to both the IRS and the seller.
- Recipient’s Responsibility: The seller uses this information to calculate taxable gain on the sale of the life insurance policy. They may owe capital gains tax on the difference between the sale price and their basis in the policy.
- Key Details Reported: The form includes details on the policy, the sale amount, the buyer, and the seller, ensuring both the IRS and the policy seller have a record of the transaction.
Form 1099-SB (Seller’s Investment in Life Insurance Contract)
- Purpose: Form 1099-SB is used in conjunction with a life insurance policy sale reported on Form 1099-LS. It reports the policy’s “basis” (i.e., the seller’s investment in the contract), which helps determine taxable gain on the sale.
- Who Files: The life insurance company that originally issued the policy files Form 1099-SB to inform the buyer of the policy about the seller’s investment or basis.
- Recipient’s Responsibility: The buyer uses this information to determine the proper basis for calculating future tax obligations related to the policy (e.g., taxable gains if the policy is surrendered).
- Key Details Reported: It includes information on the seller’s cost basis in the policy and other related data that can affect the tax implications of the policy sale.
