Form 8925 and Employer-Owned Life Insurance

A common practice in closely held businesses is to insure the life or lives of key employees or owners. When Congress enacted the Pension Protection Act in 2006, some requirements were imposed on these types of life insurance arrangements. First written notice must be given to any employee on whom a company purchases life insurance. If the proper notice is not given, then the insurance proceeds likely will be considered taxable.  Employers are also required to file IRS Form 8925 annually with regard to these insurance policies.  It seems that failing to report the policy on Form 8925 will likely result in the proceeds being taxable even if the Company did not deduct the premiums on its tax return.  There are specific issues to consider with employer-owned life insurance policies. If you or your business need advice in this area, click here to contact Paul to discuss the issue.

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