What is the purpose of Form 8925?
Use Form 8925 to report 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.
What is Section 101 J )?
BACKGROUND. Section 101(j)(1) provides that, in the case of an employer-owned life insurance contract, the amount excluded from gross income of an applicable policyholder under § 101(a)(1) shall not exceed an amount equal to the sum of the premiums and other amounts paid by the policyholder for the contract.
Are key man life insurance proceeds taxable?
Though key person life insurance premiums aren’t tax deductible, the proceeds of the policy are usually provided to the company free of income tax.
What is an employer-owned life insurance contract?
Employer-owned life insurance contract: A life insurance contract that is (1) owned by a person engaged in a trade or business and under which such person (or a related person) is directly or indirectly a beneficiary under the contract, and (2) which covers the life of an insured who is an employee of the “applicable …
Is employer paid life insurance taxable to the employee?
Life insurance premiums, under most circumstances, are not taxed (i.e., no sales tax is added or charged). If an employer pays life insurance premiums on an employee’s behalf, any payments for coverage of more than $50,000 are taxed as income. Interest earned for prepaid insurance is taxed as interest income.
What is a coli plan?
Corporate Owned Life Insurance (COLI) is an investment alternative to Mutual Fund scenarios that allow a corporation to accumulate a tax-deferred asset. The company purchases and owns a life insurance policy on a key employee and is the primary beneficiary.
What is Section 7702 of the Internal Revenue Code?
Section 7702 of the U.S. Internal Revenue Service (IRS) Tax Code defines what the federal government considers to be a legitimate life insurance contract and is used to determine how the proceeds are taxed. The proceeds of policies that do not meet the government’s definition are taxable as ordinary income.
Can life insurance be considered a business expense?
Yes, you can usually take a life insurance deduction for the premiums you pay on employees as a business expense. So, the premiums paid on your employees’ lives are considered a tax-deductible life insurance expense should be claimed as a general business expense.
Is corporate owned life insurance tax deductible?
Yes, as a business owner, you’re able to deduct premiums for life insurance policies as long as those policies are owned by company executives and employees and are paid for by your business.
How is corporate owned life insurance taxed?
Many businesses own life insurance on employees and owners, and designate the business as beneficiary of the policy. In general, when death benefits on these policies are collected, they are free of income tax.