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Section: Client Services

Client Services
  • Why was I taxed on the interest earned on accumulated dividends when I did not receive it in cash?

    Although interest accumulated is not paid to you in cash, it is added back into the value of the policy.  This interest must be reported to the Internal Revenue Service (IRS) as income for the year in which it was earned.

  • Tax was withheld from my accumulated interest. Why?

    There could be several reasons:

    • We may not have a W-9 on file certifying your tax identification number (TIN), in which case we are required to withhold taxes.  You may complete and mail us Form W9 to certify your TIN going forward.
    • The IRS may have notified us that you have under-reported income in the past, in which case we are required to continue to withhold taxes until the IRS notifies us otherwise. You should contact the IRS.
    • The IRS may have notified us that the TIN we show on your record does not match the Social Security Administration records. To address this, we would have sent you a “B” Notice requesting that you submit a W-9 form so we could make the corrections.  If we do not receive the W-9, we are obligated to withhold tax.
    • Monies withheld for tax purposes is remitted to the federal or state government. The only way you can recoup them is to file an income tax return.
  • Income received from death proceeds can be taxable. Why?

    There could be several reasons:

    • If the payment of death proceeds was made as a lump sum, any interest that amounts to more than $10 will be reported to the IRS on Form 1099-INT.
    • If the proceeds were placed in a Penn Mutual Beneficiary Account and more than $10 interest was earned, the interest will be reported on Form 1099-INT. The tax form will show BAA DCINT (Benefit Access Account - Death Claim Interest).
    • If proceeds were placed under an income option, the proceeds are not taxable, but the interest (taxable earnings) is.  The taxable amount is calculated according to a specific formula, and a portion of each payment will be reported as taxable.

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