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If client gives me 1099-R with a taxable amt in box 2 & has code 7D in box 7 & client says L-T care premiums are pd directly to insurance so NOT taxable, how do I report?

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Level 1
The more I read about LTC insurance, the more confused I get. If this is non-taxable like client says, then why is the 1099-R even issued?  The box for "taxable amount not determined" is blank. Client is elderly so I don't want to rattle her and say she's wrong. Help!
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Level 10

I think maybe a call to the issuer of the 1099-R is in order.  My guess is that the client is not properly understanding what this is.  I have one client with one of these weird hybrid retirement/LTC policies, the LTC is reported on a 1099-R by itself in box 1 only, box 2a is $0, box 7 code W, box 8 "Other" equals box 1.

@Skylane , our local insurance expert, may be able to shed some light on this.

 

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Level 2

This 1099-R appears to be an annuity payment from a private insurer and not an LTC payment.  Chances are that the taxable amount is interest this person earned on the annuity investment.  Your client should have received a 1099-LTC for the payment(s) she would have received from her LTC carrier.  Depending on her receipt mechanism, she may need to search on the provider's website to pull that information versus receiving it in a paper medium.

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Level 10

I think maybe a call to the issuer of the 1099-R is in order.  My guess is that the client is not properly understanding what this is.  I have one client with one of these weird hybrid retirement/LTC policies, the LTC is reported on a 1099-R by itself in box 1 only, box 2a is $0, box 7 code W, box 8 "Other" equals box 1.

@Skylane , our local insurance expert, may be able to shed some light on this.

 

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Level 2

I personally have not seen any of these but rbynaker makes a very good point in contacting the issuer for clarification.  My response was based on the point that she noted that 7D was showing in box 7.

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Level 10

@taxmanbrian wrote:

I personally have not seen any of these but rbynaker makes a very good point in contacting the issuer for clarification.  My response was based on the point that she noted that 7D was showing in box 7.


I suspect there's more than one policy at work here (although it wouldn't be the first time I've seen an incorrect 1099).  Three-way call with the agent should clear things up pretty easily and get everyone on the same page.

Rick

PS: Thanks, Bruce, for chiming in so quickly.

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Level 8
Level 8

Sorry, i can’t shed a lot of light here. I’ve limited experience with LTC. That said, LTC contracts written over the last 20 years have a variety of components. Some, not only had ‘care’ provisions, but income continuation benefits as well. I.e. you could receive $1000/mo for discretionary Spending.

So, some of the benefit is medical reimbursement and other is considered income. The insurer should be able to provide a breakdown of benefits paid.

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Level 1

Thanks to all who replied. I talked to my client who talked to her investment guy. He's going to call the insurance company that issued the 1099-R and get the low down. I appreciate your responses!

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Level 11

I have a couple clients who get one of these 1099R's with Code W -- it always comes with a letter from the insurance company that says it's not taxable.  Don't you hate it when clients bring everything stuffed back in the envelope, except when you would really like to see what else came in the envelope?