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Can the IRS take the money received from a life insurance policy? I'm concerned about whether the IRS has the authority to seize life insurance payouts.
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Yes, the IRS can potentially take a portion of a life insurance payout under certain circumstances. Life insurance proceeds are generally not taxable income for the beneficiary. However, if the policy was owned by the deceased person and they had outstanding tax debts, the IRS may be able to claim a portion of the payout to satisfy those debts. This is known as a 'tax lien' on the life insurance proceeds. It's important to note that the IRS can only claim the amount necessary to satisfy the tax debt, and any remaining funds would be paid to the beneficiary. Additionally, if the policy was transferred to someone else within three years of the insured person's death, the IRS may still be able to include the proceeds in the deceased person's estate for tax purposes. It's always a good idea to consult with a tax professional or financial advisor for specific guidance regarding your situation.
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