Form 8925 needs to be filed if a business entity has “employer-owned life Insurance contracts” for its key employees and the following conditions are met:
a) key-employee life insurance policy is owned and paid by the business.
b) the beneficiary of the life insurance is the business.
c) the life insurance contract is issued after August 17, 2006.
A written notice and consent form must be signed before the insurance policy issuance date in order to avoid a penalty. Pursuant to IRC Section 101(j), “employer-owned life insurance contracts” can be subject to income tax for the excess of proceeds received over the sum of premiums paid if the consent form is not signed and Form 8925 is not filed. Click here for a sample employer-owned life insurance consent form. You can read more about it here.