I went through this exact situation when my father passed last year. The insurance companies are likely withholding taxes because they're being overly cautious or have automated systems that don't properly distinguish between different types of payouts. Here's what I learned: The 10% withholding is probably happening because the insurance company is treating this like a retirement account distribution rather than a life insurance death benefit. This is a common error, especially if the policies had any investment components or if there was a delay between death and payout that generated interest. My advice: Contact each insurance company directly and ask them to provide a detailed breakdown showing the death benefit amount versus any interest or earnings. Request corrected 1099 forms if they misclassified the payout. Most will cooperate once you point out the error. If they won't budge, you'll definitely get the money back when you file your taxes. Just make sure to report the withholding on your return - the IRS will credit you for taxes that shouldn't have been withheld in the first place. I ended up getting back about $8,500 in my refund from similar overwithholding.

I'm dealing with a very similar situation right now with my grandmother's life insurance policies. Two smaller policies withheld taxes while the larger one didn't, and I was completely confused about why. After reading through all these responses, it sounds like the insurance companies are making errors in how they classify these payouts. I'm definitely going to contact them directly with the death certificate and policy documents to request corrected 1099 forms. One question I have though - if there was interest that accrued between the date of death and payout, how do I figure out what portion of the withholding was legitimate (for the interest) versus what should be refunded (for the death benefit portion)? The insurance statements aren't very clear about breaking this down. Also, has anyone had success getting the insurance companies to actually admit they made an error and issue corrected forms? Or do they usually just tell you to handle it on your tax return?

Have you checked out FreeTaxUSA? Their Deluxe version ($7) covers personal returns really well, and they have a separate business version that handles 1065 partnership returns for about $60. Their interface is much cleaner than H&R Block and TaxAct, and they let you see the actual forms as you work. I've used them for my small partnership for two years now, and their step-by-step approach is perfect for DIYers. Plus their customer service usually responds within a day when you have questions. Major savings compared to paying an accountant for simple returns.

Quick warning about DIY partnership returns - don't forget about basis tracking! This is the one thing most software doesn't handle well. Your partnership basis changes every year based on contributions, distributions, and profit/loss allocation. If you don't track this correctly, you could have major issues down the road, especially if you ever take distributions or sell your partnership interest. Ask me how I know... ended up with a surprise tax bill because I didn't realize my basis was lower than the distributions I took.

I'm going through a similar situation right now with my uncle's life insurance policy from last year. After reading through all these responses, I called the insurance company this morning and asked specifically for their "1099 department" like Angelina suggested - what a difference that made! The rep was able to pull up my payout details immediately and confirmed that out of the $65,000 total I received, $2,100 was actually interest that accumulated during their 52-day processing period. She said they should have automatically sent me a 1099-INT for that interest portion, but there was apparently a system glitch that prevented some 2024 forms from being mailed out. They're expediting a corrected 1099-INT to me within 5 business days. I had no idea I was supposed to report that interest - I would have completely missed it on my tax return! Really grateful for everyone sharing their experiences here, especially the tip about asking for the specific department that handles tax documents. For anyone else dealing with this, definitely request that itemized breakdown showing the death benefit separate from any interest. Don't just assume the entire payout is tax-free like I initially did.

I went through this exact situation with my grandmother's life insurance payout last year. Like others have mentioned, the death benefit itself ($78,000 in your case) is completely tax-free and won't generate a 1099 form - that's why you haven't received one. However, I'd definitely recommend calling the insurance company back and asking specifically for their "tax documents department" or "1099 department" as suggested by others here. When I did this, I discovered that my payout included about $1,800 in interest that had accumulated during their processing delay, which I needed to report as taxable income. The key is getting an itemized breakdown of your payout. Many companies will initially just show one lump sum, but they're required to separate out any interest portions if you request it. If there was any delay between your aunt's death and when you received the money (especially if it was more than 30-45 days), there's a good chance some portion was interest that should have generated a 1099-INT. Even if you don't receive the 1099-INT form, you're still required to report any interest as income on your return. Better to find out now than have issues later!

H&R Block is one of the most expensive options for a basic return like yours. I'm a married homeowner with W-2 income too, and I switched to TurboTax which was about $120 all in (federal + state). FreeTaxUSA is even cheaper at around $40-50 total. Unless you have some complicated situation you didn't mention, there's no reason to pay H&R Block prices. The mortgage interest deduction is super straightforward - you just enter the numbers from your Form 1098.

I went through this exact same situation last year! My wife and I both have W-2 jobs and we bought our first house in 2023. I called around to different H&R Block locations and got quotes ranging from $275-$350 for our return (married filing jointly with mortgage interest deduction). What really helped me was calling during their slower hours (mid-morning on weekdays) rather than evenings or weekends when they're swamped. I also asked specifically about any first-time homeowner discounts - one location offered $25 off. That said, after getting those quotes, I ended up using TurboTax Deluxe instead for about $100 total. The mortgage interest part was really straightforward - just had to enter the info from our 1098 form that the mortgage company sent us. Saved us almost $200 and I felt confident we did it correctly. If you're set on using H&R Block though, definitely call multiple locations in your area since pricing can vary between franchises.

Ugh I got audited last year and this exact issue came up. My advice is to take photos of ALL receipts where you claimed business expenses and store them digitally by date. I had to go through hundreds of receipts during my audit and the ones I couldn't find or that were too faded to read were automatically disallowed as deductions.

Great thread! I'm dealing with this exact same situation with my freelance graphic design work. One thing I learned from my accountant is that you should also keep a simple business expense log alongside your receipts. Just a spreadsheet with columns for date, vendor, total amount, business portion, and business purpose. This way if you ever get audited, you're not just relying on highlighted receipts - you have a clear paper trail showing your thought process for each deduction. The IRS loves documentation that shows you were being deliberate and organized rather than just guessing. Also, don't forget that you can deduct the business portion of things like gas when you're making those mixed shopping trips! If you drove to Target specifically to buy business supplies but also grabbed personal items while there, you can still claim the mileage as a business expense.