**August 6,1973** **M29-1,Part VI**

**CONTENTS**

**CHAPTER 7. TAXATION IN**

**RELATION TO LIFE INSURANCE BENEFITS**

PARAGRAPH PAGE\
7.01 General 7-1

7.02 Requests for Treasury Department Form 712,\
Life Insurance Statement 7-1

7.03 Notice of Levy by Internal Revenue Service 7-1

**7-i**

**October 14,1977** **M29-1, Part VI\
Change2**

w **CHAPTER 7. TAXATION IN RELATION TO LIFE INSURANCE BENEFITS**

**7.01 GENERAL**

a\. When letters are received containing requests for information
concerning the effect of the Federal estate tax on NSLI or USGLI
benefits, the writer will be advised to refer the question to the
District Director, Internal Revenue Service. If the writer requests
information regarding the taxability of NSLI or USGLI benefits by State
or municipal authorities, the correspondent will be referred to the
State or local tax authorities.

b\. The Internal Revenue Service will be awarded installment payments
toward the satisfaction of a tax levy when the levy exceeds the total
amount payable to a principal beneficiary without additional monthly
levies. It is a prerequisite that the tax indebtedness is that of the
person(s) to whom the insurance proceeds are payable.

**7.02 REQUESTS FOR TREASURY DEPARTMENT FORM 712, LIFE INSURANCE
STATEMENT**

a\. Upon the request from a beneficiary of NSLI or USGLI, or the
representative of the estate of the insured,

or their agents or attorney, TD Form 712 will be prepared in
quadruplicate for each policy. The original and two copies will be sent
to the beneficiary or representative, and one copy will be retained in
the insurance folder. If the District Director of Internal Revenue
Service requests completion of TD Form 712, it will be prepared in
triplicate. The original and a copy will be sent to the District
Director and one copy will be filed in the insurance folder.

b\. The TD Form 712 will be completed with the appropriate information
which will be available from the insurance folder. Item 1 7A will be
completed depending upon which option the insurance proceeds are paid.
The following is a guideline to be used for completion of item l 7E:

\(l\) If the insurance is an N, H or V policy, the notation will be
American Experience Rate of Mortality with interest at the rate of 3
percent per annum.

\(2\) If the insurance is a K policy, the notation will be American
Experience Table of Mortality with interest at 3 1/2 percent per annum.

\(3\) Rate of interest for other insurance is as follows:

\(a\) W-2 1/2 percent.

\(b\) RH and RS\--2 1/2 percent.

\(c\) J, JR, JS-3% percent.

**7.03 NOTICE OF LEVY BY INTERNAL REVENUE SERVICE**

a\. When the VA has been advised that there is a tax indebtedness
against the beneficiary to whom the insurance proceeds are payable, the
Death Claims activity will send a letter to the beneficiary to inform
him or her that a notice of levy has been received, and that under the
Federal Tax Lien Act of 1966, the VA is required to abide by the levy.
The letter will also advise the beneficiary that unless he or she
submits proof within 90 days from the date of the letter that the
delinquent tax has been paid, the amount payable will be sent to the
Internal Revenue Service.

b\. \[If the mode of settlement is to be made, in monthly installments,
a letter will also be prepared for\] the District Director, Internal
Revenue Service, \[and will be released at the time the 90-day
notification is sent to the beneficiary. The letter specifying an
agreement for payment between the Veterans Administration and the
Internal Revenue Service should be\] as follows:

**7-1**

M29-l Part VI October 14, 1977\
Change2

SUBJ: Montlily Payments on Notice of Levy Dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Served to Reach Policy No.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

RE: Taxpayer\'s Name and Social Security Number

Address

Monthly payments in the amount of \$ payable under the terms of the
insured\'s option will be

sent to you until the tax levy is satisfied or the taxpayer beneficiary
ceases to have an interest in such payment.

It is mutually agreed that upon adequate notification the beneficiary no
longer has an interest in these payments, any overpayments or duplicate
payments will be refunded to the Veterans Administration, provided a
claim for refund is made within 9 months from date of payment pursuant
to Section 6343(b), Internal Revenue Code of 1954.

(Signature and Title)

Veterans Administration

Agreed:

(Signature and Title)

Intei-iial Revenue Service

c\. If, at the end of the 90-day period the beneficiary has not notified
the VA that the tax lien has been satisfied, and upon receipt of a
properly executed agreement from the Internal Revenue Service,
settlement will be authorized under the applicable option to the
District Director, Internal Revenue Service, for the account of she
beneficiary. In item 24, Remarks, of VA Form 29-444, Award Brief and
Authorization for Payment of Insurance, note Settlement Under Notice of
Levy Received (Date).

d\. Payment in lump sum or monthly installments will afford the VA a
good acquittance only if the entitled beneficiary(ies) is alive on the
date such payment(s) is made. The VA is required to request a refund of
any payments niade under the levy following the death of any individual
involved. To be effective, such request for refund must be made within 9
months of the date of the payment(s). For this reason, at the time the
award is sent to thc Finance activity for payment, a letter(s) will be
released to tlie principal or contingent beneficiary(ies) to read
substantially as follows:

Settlement of the \$ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Government
Life Insurance Policy No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_ for which you
were named (PRINCIPAL) (CONTINGENT) beneficiary has been authorized to
the Internal Revenue Service under a tax levy received in the Veterans
Administration (DATE). Payment(s) will be made (APPROPRIATE
DESCRIPTION/DATE(S)). Payment(s) may be made only during your hfetime.
In the event of your death prior to full payment of the levy, any
proceeds remaining will become payable to the next succeeding
beneficiary(ies). In that event, this office should be notified as soon
as possible.

**7-2**