| Instructions for Form 1099-LTC |
2006 Tax Year |
Instructions for Form 1099-LTC - Main Contents
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Specific Instructions for Form 1099-LTC
File Form 1099-LTC, Long-Term Care and Accelerated Death Benefits, if you pay any long-term care benefits.
Long-term care benefits means—
-
Any payments made under a product that is advertised, marketed, or offered as long-term care insurance (whether qualified
or not)
and
-
Accelerated death benefits (excludable in whole or in part from gross income under section 101(g)) paid under a life insurance
contract or
paid by a viatical settlement provider.
File Form 1099-LTC if you paid any long-term care benefits, including accelerated death benefits. Payers include insurance
companies, governmental
units, and viatical settlement providers.
Viatical Settlement Providers
A viatical settlement provider is any person who—
-
Is regularly engaged in the trade or business of purchasing or taking assignments of life insurance contracts on the lives
of terminally or
chronically ill individuals and
-
Is licensed in the state where the insured lives. If licensing is not required in the state, the provider must meet other
requirements
(including those below) depending on whether the insured is terminally or chronically ill.
-
If the insured is terminally ill, the provider must meet the requirements of sections 8 and 9 of the Viatical Settlements
Model Act of the
National Association of Insurance Commissioners (NAIC), relating to disclosure and general rules. The provider must also meet
the requirements of the
Model Regulations of the NAIC for evaluating the reasonableness of amounts paid in viatical settlement transactions with terminally
ill
individuals.
-
If the insured is chronically ill, the provider must meet requirements similar to those of sections 8 and 9 of the Viatical
Settlements
Model Act of the NAIC and must also meet any standards of the NAIC for evaluating the reasonableness of amounts paid in viatical
settlement
transactions with chronically ill individuals.
However, if a state enacts a licensing requirement but does not permit viatical settlement providers to engage in business
until the licenses are
granted, the provider will not be considered as licensed under section 101(g)(2)(B)(i)(I). See Rev. Rul. 2002-82, which is
on page 978 of Internal
Revenue Bulletin 2002-51 at
www.irs.gov/pub/irs-irbs/irb02-51.pdf.
Qualified Long-Term Care Insurance Contract
A contract issued after 1996 is a qualified long-term care insurance contract if it meets the requirements of section 7702B,
including the
requirement that the insured must be a chronically ill individual (see Chronically ill Individual below). A contract issued before 1997
generally is treated as a qualified long-term care insurance contract if it met state law requirements for long-term care
insurance contracts and it
has not been materially changed.
Accelerated Death Benefits
An accelerated death benefit is any amount paid under a life insurance contract for an insured individual who is terminally
or chronically ill. It
also includes any amount paid by a viatical settlement provider for the sale or assignment of a death benefit under a life
insurance contract for a
chronically or terminally ill individual.
Chronically ill Individual
A chronically ill individual is someone who has been certified (at least annually) by a licensed health care practitioner
as—
-
Being unable to perform, without substantial assistance from another individual, at least two daily living activities (eating,
toileting,
transferring, bathing, dressing, and continence) for at least 90 days due to a loss of functional capacity or
-
Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive
impairment.
Terminally ill Individual
A terminally ill individual is someone who has been certified by a physician as having an illness or physical condition that
can reasonably be
expected to result in death in 24 months or less.
Report payments only if the policyholder is an individual. Reportable payments are those made to the policyholder, to the
insured, or to a third
party.
You may report benefits paid from each contract on a separate Form 1099-LTC. At your option, you may aggregate benefits paid
under multiple
contracts on one Form 1099-LTC if the same information is reportable on the form for each contract (other than the amount
of benefits paid).
The policyholder is the individual who owns the contract, including the owner of a contract sold or assigned to a viatical
settlement provider. In
the case of a group contract, the term policyholder includes the certificate holder (or similar participant). You must report
long-term care benefits
to the policyholder even if the payments were made to the insured or to a third party (for example, a nursing home, caretaker,
or physician). The
policyholder also may be the insured.
Enter the name, address, and taxpayer identification number (TIN) of the policyholder on Form 1099-LTC. If the policyholder
is not an individual,
no reporting is required.
The insured is the chronically or terminally ill individual on whose behalf long-term care benefits are paid.
Enter the name, address, and TIN of the insured on Form 1099-LTC.
Statement to Policyholder and Insured
If you are required to file Form 1099-LTC, you must furnish a statement or acceptable substitute to both the policyholder
and to the insured as
shown.
For more information about the requirement to furnish a statement to the policyholder and to the insured, see part M in the
2007 General
Instructions for Forms 1099, 1098, 5498, and W-2G.
The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 1099-LTC.
Additionally, the
IRS encourages you to designate an account number for all Forms 1099-LTC that you file. See part L in the 2007 General Instructions
for Forms 1099,
1098, 5498, and W-2G.
Box 1. Gross Long-Term Care Benefits Paid
Enter the gross long-term care benefits paid this year (other than accelerated death benefits). These benefits are all amounts
paid out on a
per diem or other periodic basis or on a reimbursed basis. It includes amounts paid to the insured, to the policyholder, and to third
parties. You are not required to determine whether any benefits are taxable or nontaxable.
Box 2. Accelerated Death Benefits Paid
Enter the gross accelerated death benefits paid under a life insurance contract this year to or on behalf of an insured who
has been certified as
terminally or chronically ill. Include the amount paid by a viatical settlement provider for the sale or assignment of the
insured's death benefit
under a life insurance contract.
Box 3. Check if Per Diem or Reimbursed Amount
Check a box to indicate whether the payments were made on a per diem or other periodic basis or on a reimbursed basis. For accelerated
death benefits, do not check a box if you made payments on behalf of a terminally ill person. Per diem basis means payments made on any
periodic basis without regard to actual expenses. Reimbursed basis means payments made for actual expenses incurred.
Box 4. Qualified Contract (Optional)
Check the box to indicate whether long-term care insurance benefits are paid from a qualified long-term care insurance contract.
See Qualified
Long-Term Care Insurance Contract on page LTC-1.
Box 5. Check if Chronically ill or Terminally ill (Optional)
Check the box to indicate whether the insured was chronically or terminally ill. Also, enter the latest date certified. If
the insured was neither
chronically nor terminally ill, leave this box blank. See Chronically ill Individual and Terminally ill Individual on page
LTC-1.
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