Get your taxes done using TurboTax

When you surrender a Long Term Care policy, only the amount you receive that exceeds the premiums you paid would be taxable, as long as you didn't deduct the premiums. Any 1099 issued should only be for amounts you earned on the policy if it had a cash surrender value. Review your policy; it should have a section about cash surrender value if applicable. 

The surrender of an insurance policy or endowment contract for its cash surrender value, as distinguished from an exchange of policies or contracts, results in taxable income where the amount received on surrender exceeds the premiums or consideration paid.

When you surrender the policy, the amount of the cash basis is considered a tax-free return of principal. Only the amount you receive over the cash basis will be taxed as regular income. Any refund on a complete surrender or cancellation of the contract shall be includible in gross income to the extent that any deduction or exclusion was allowable with respect to the premiums.

If you find that part of the amount you received is taxable, and the company won't issue a 1099, you can enter it on your return in TurboTax as "Other Income". In TurboTax Online:

1. Sign into your account, your return, and click "Pick up where I left off
2. Click Federal
3. Click Wages & Income
4. Get to All Income and scroll down to Less Common Income and click the down arrow / Show more
5. Scroll down to Miscellaneous Income, 1099-A, 1099-C and click Start
6. Scroll down to Other reportable income and click Start
7. Type   surrender proceeds   into the description box and enter the amount

See IRS Publication 925 for more general information about long-term care policies