Code W on 1099-R

[dmertz]

It seems to me that Form 5329 would only have been created with code 12 on line 2 if you explicitly made an entry of an amount for Other reason exception for a distribution mistakenly entered with code 1 that you subsequently corrected.  Make sure that you actually did select code W on TurboTax's 1099-R form.  You should be able to simply delete the Form 5329 and it should stay gone.

[prettyspring]

Thank you!

[Pokey54]

So, my husband and I are definitely under 70 1/2 years old and therefore do not have to take Required Minimum Distributions. With our life insurance policy comes a rider for a qualified long term care contract.  We get a 1099-R every year showing what is allocable to the contract. Box 1 has an amount and Box 8  has the same amount and then there is a code W in Box 7.   There are no other codes and nothing else is checked off.  This year for 2020 I went into TT and as I was completing the taxes, I put all the entries in the step by step instructions, as I have done in the past many times and this time a form 5329 popped up with a code 12 in it.  This has never happened before, so I inspected my previous years entries against what I did this year with the 1099-R and they were all the same. I deleted out the 1099-R's and the 5329's and tried again and just as I would create the 1099-R, again the form 5329 popped up.  So, again I deleted out the 1099-R and the 5329 again. The only thing in the 5329 was the amount in the 1099-R and the code 12 in it.  Well, I wasn't giving up.  I would rather report all information returns, because the IRS has that information.  So, I went into the forms and I called up a form 1099-R instead of using the step by step instructions.  I typed in the form I needed, 1099-R and opened up a new form and I put everything in the form itself.  Where the Code W came up the W came up with two lines of words for one sentence, so I pressed on the second line of wording, (don't know if that did the trick or not), but it was all one sentence. It is just that on my computer it rolled into two lines.  I entered everything in. I entered the amount in box 1 and box 8 and a zero for box 2a. I put the state and state ID in made sure to go over the EIN number for the payer, the name, the address and made sure the normal 1099-R box was checked off at the top. I made sure my own info populated as the recipient.  I was very careful and looked constantly after every step I took to see if the form 5329 would pop up. Well it did not.   No form 5329 popped up.  I agree with Jason that when I look at the back of the 1099-R form for instructions regarding long term care contract charges, you do not have to enter the 1099-R form in your taxes, but I always have.  The reason is you can call the IRS and you really can get 10 different answers from 10 different people who work from the IRS as they all have their own interpretations.  Regardless, this is what I did.  Better to be safe than sorry.  However, Jason is right, it does say right on the 1099-R you do not have to enter the 1099-R form. But, if you are like me. Well go ahead and try what I did. Don't go through the steps, use the form itself. Delete out the 1099-R and the 5329 and manually enter it into the form.   

[prettyspring]

Hi Pokey54,

Per your instructions “So, I went into the forms and I called up a form 1099-R instead of using the step by step instructions.  I typed in the form I needed, 1099-R and opened up a new form and I put everything in the form itself. “    

How do you call a NEW form?  Under ‘View>Forms’ After I deleted Form 1099-R and Form 5329-S TT only displays the forms that it generate for my tax return.   

Thank you!

[briggsr]

So, go into Forms, should be on the top blue bar on the right side.  It would be up to the top of the screen to the right of your estimated Federal & State Refund, thus far.  Once you are in forms, on the left right below the blue bar you will see Open Form and Errors.  It is below the blue bar where it says Turbo Tax and the version. My version says Turbo Tax Home & Business and right below that on the left hand side of the screen you can see open form and you can see errors. Press Open Form.  Type in the search Box 1099-R

You will get multiple options.  Press on the line that says Form 1099-R Pensions/IRA Distributions.

You can double click on it or you can highlight it and press open form.  If you double click it it will come to an Add Form Page. You will name it here, such as Whom you got the form from, Ameriprise, State Farm, etc.  Doesn't really matter what you name it.   That's just for your reference.  Then press add form.

[prettyspring]

Hi briggsr,

Thank you! I was able to add the new form 1099-R, updated, and saved it without TT generating form 5329. 

🙂

[Jos2me]

I received this 1099-R with Code W. Your explanation is what was stated on the cover letter from Lincoln Life Insurance. My question though is, since my form shows an amount, is that something I can add to my medical expenses? If it is, it will help me pay less tax since I have some other medical expenses that I paid out if pocket. Thank you for any help.

[Irene2805]

I think you could make a case for deducting the case of the LTC rider if the IRS ever questioned it.

Here is the background info I posted in response to your previous posting:

The IRS states that "[a] qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services."   Pub. 502 - Medical and Dental Expenses

If the cost of the LTC rider is deducted from the cash value of the life insurance policy you cannot deduct the premiums as a medical expense.  

If you have a whole life insurance policy, you can, however, take the position that the cost of the LTC rider is eligible for a deduction as a medical expense.  This is because the LTC rider charges on whole life policies are taken before premium dollars are placed in the cash value account. The tax code is unclear regarding this position.

Life insurance premiums are not deductible, so if you decide to take a deduction, the deduction should be for only the costs of the LTC rider.

@Jos2me