I terminated a life insurance policy that had a cash value (approx. $20,700) in 2013. As expected, I received a 1099-R that showed this distribution in box 1, the amount of premiums I had paid ($10,200) in box 5, and the taxable amount ($10,500) in box 2.
However the insurance company also sent me a 1099-INT that has an amount of interest reported in box 1 ($10,200) that is similar to, but not quite the same, as the taxable amount reported on the 1099-R. When I contacted the insurance company about why they issued a 1099-INT they told that IRS regulations require them to, but that the amount reported on the 1099-R is what I will need to pay taxes on. They are going to send me a letter (not yet received) stating that only the amount on the 1099-R is taxable and also will explain the difference in the amounts on the 2 forms.
I'm not sure what to do at this point as I'm not entirely comfortable that both amounts are being sent to the IRS and the IRS will have no way of knowing that the amount on the 1099-INT is not something I should be taxed on.