Last year I received a letter from Genworth a long term care company stating that I have previously elected a paid up option that required no further premium payments. As part of this settlement I can elect cash payment of $1250.00 and still retain my current paid up benefit. My policy including any reduced benefits associated with the selection of a settlement option, is intended to be a federally tax qualified long term care insurance under Section 7702B of the Internal Revenue code of 1986 as amended. Genworth has stated that it is my responsibility to assess any potential tax consequences of selecting a settlement option, for example whether an cash payment is taxable.
This is what I have read on the letter from Genworth. My question is I have already filed my taxes because I did not realize that I may or may not have to pay taxes on the $1250.00. I guess I was expecting some 1099 form if I received this type of income. Can you tell me if this is taxable for both Federal and State and if it is I will have to file an amended return. Also if this is taxable where in Turbo Tax do I find the section on where to enter this information?
