Posted by UNIVERSAL ACCOUNTING & FINANCIAL SERVICES INC.

Understanding Form 1099-LTC /Long Term Care and Accelerated Death Benefits

Understanding Form 1099-LTC /Long Term Care and Accelerated Death Benefits

This is one of the series of the 1099s from Uncle Sam with which taxpayers can report funds from a series of sources that are not familiar. With this form, individual taxpayers can report long term care benefits like accelerated death benefits.

Majorly, they give this form out in January of the previous year.


Who Qualifies for a Form 1099-LTC

You will get a 1099-LTC if, in your name, you received LTC benefits in the previous year, which includes accelerated death benefits. Some companies and insurers give out LTC insurance and policies that take care of bills for personal and medical care expenses for critically ill people and are incapable of taking care of themselves.

The person qualifies for accelerated death benefits provided the insured is certified by a doctor as critically ill. A licensed healthcare provider also can certify the person as terminally ill. 

Typically, payers in this category are government agencies, insurance firms, and viatical settlement providers. Part of the duty of these providers is to buy or take insurance contract assignments on chronically ill people's lives. The payers also should be licensed in the dwelling state of their client. (The insured) 

Payments in this category are the ones you and the third party got and paid to the insured.  Everyone that paid these benefits must have it on Form 1099 LTC. The beneficiary and Uncle Sam must have a copy as well.

People that got long term care benefits in the previous year, like accelerated death benefits, will get a 1099-LTC.


Reading a Form 1099-LTC

You should be knowledgeable about a couple of terms before sending in 1099-LTC alongside your tax return.

 

Policyholder: This is the owner of the contract. It also includes the owner of the sold agreement.

 

Per Diem Basis: These are periodic payments that do not factor in the real expenses incurred in the period.


Accelerated Death Benefits: Provided the insured is certified by a licensed physician as terminally ill, you can entirely exclude this from your income.

It is allowable to exclude the accelerated death benefits of people certified as terminally ill, the same way it would happen if paid using a qualified LTC insurance contract. There might be a considerable benefit amount listed in your 1099-LTC, which might not be subjected to the tax rate.

For the Per diem benefits, there is a maximum daily amount that binds the benefits portion excluded from income. Exceeding this limitation might make some portion of the services taxable.

Here is some information that you will have on the 1099-LTC

  • The insured's taxpayer identification number.

  • Adoption taxpayer identification number

  • Social security number

  • The employer’s identification number

  • Your account details

  • Gross benefits coming from an LTC contract

  • Gross accelerated death benefits for the year.

  • Payment term of these amounts: whether per diem or as reimbursement of long term care expenses. 

There might be additional info on the form that will reveal if the insured's certification revealed terminal or chronic illness. There will also be the latest date of certification.

Also, there will be the name of the payer and the federal tax identification number. The tax year for the reported amounts and the account details will also be there. There are times it also includes the total number of days paid.


Information Present on Form 1099-LTC

Box 1:  Here is the Portion of Gross LTC payments made: Box 4 will show if the contract was qualified. 

Box 2: This is the value of accelerated death benefits

Box 3: indicate if the payment were made on a reimbursement basis or per diem basis.

Box 4 reveals if it qualifies as an LTC contract.

Box 5: If terminally or Chronically ill

Long term care insurance contracts that were issued:

  • After the year 1996 needs to meet the requirement of section 7702B to qualify

  • Before the year 1997 are considered qualified provided they meet the requirements of the state law

There are copies of Form 1099-LTC on the IRS website. 

Conclusion

In the previous year, beneficiaries of LTC need to include Form 1099-LTC as part of their tax filing obligation. Anyone who got such benefits should receive the form from the government or insurance agencies.

Taxpayers may and may not owe taxes on the amounts listed. For additional info on 1099-LTC, contact the IRS. However, you are better off working with a tax provider or a tax expert.


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