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Life Insurance Disclosure

If you have any life insurance policies issued after August 17, 2006 on employees where your business is the owner/beneficiary of the policy, you have a disclosure requirement (Form 8925) that needs to be attached to your tax return.

Failure to disclose these policies is critical because it could result in taxability of life insurance proceeds.

What is included in the life insurance disclosure?

This disclosure reports the number of employees covered by employer-owned life insurance contracts issued after August 17, 2006 and the total amount of employer-owned life insurance in force on those employees at the end of the tax year. Policyholders must also indicate whether a valid consent has been received from each covered employee and the number of covered employees for which a valid consent has not been received.

Employees are defined for purposes of this disclosure as an officer, director, or highly compensated employee such as a person who is a 5% owner at any time during the year or the preceding year or for the preceding year had compensation in excess of $80,000 and was in the top-paid group of employees. A top-paid group consists of the top 20% of employees when ranked based on compensation.

You will be considered to have valid consent if the employee provides written consent to be insured under the contract and that coverage may continue after the insured terminates employment.

What information is needed to complete the life insurance disclosure?

The number of employees the policyholder had at the end of the tax year
The number of employees who were insured at the end of the tax year under the policyholder's employer-owned life insurance contract(s) issued after August 17, 2006
The total dollar amount of employer-owned life insurance in force at the end of the tax year for employees who were insured under the contracts
Does the policyholder have a valid consent for each employee? Yes or No
- If No, the number of insured employees with no valid consent

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