1099-LTC year after death final return

[tgfirst]

Need options/ways to handle a post death 1099-LTC

•father died in Oct 2021, was in a LTC facility 2021 (expenses), LTC policy company never paid any 2021 benefits

•2021 was father’s final personal tax return

•LTC lawsuit (by estate) settlement paid out in late 2022 (year after death)...$30K

•received 2022 1099-LTC, box 1   $30K, Box 3  per diem, box 4  qual contract,  with fathers SSN as TIN (not the post death trust account TIN)

How might I handle this? 

Should the 2022 1099-LTC have been recorded to the post death trust account TIN? 

Do I file an amended 2021 for fathers personal taxes (but it’s a 2022 1099-LTC)? 

Do I File a 2022 personal tax return (after final 2021)?

Can I xfer the 1099-LTC from personal TIN to the estate's Trust TIN?

[Anonymous_ · Accepted solution]

This is income in respect of a decedent (IRD).

See https://www.irs.gov/publications/p559#en_US_2022_publink100099579

Report the income on the return of the person or entity receiving it. If the estate receives it, report it on the 1041. If you receive (which is unlikely, but possible), report it on your 1040.

Do not amend your father's final (2021) return or file another return for the 2022 tax year for him.

[tgfirst]

Since the payment is presented as 2021 per diem (paid in 2021) LTC payment (stated so in the letter with the 1099-LTC),

• would the estate 2022 1041 reporting be able to list 2021 LTC expenses to offset the box 1 income? 
• And case 2, if reported on my 2022 1040, would I be able to offset with the 2021 LTC expenses?

[Anonymous_]

If they are reporting this as having been received in the 2022 tax year (on the tax reporting statement), then it would most likely be appropriate to deduct the expenses against the IRD. However, it would probably be best to report everything on a 1041 rather than a 1040.

[tgfirst]

And in both cases, I presume TurboTax Business (for Trust 1041), and TurboTax Premier (for personal 1040) will handle the 1099-LTC entries easily?  Any guidance/turbotax quirks (especially for the Business 1041 entry of a 1099-LTC)?

[Anonymous_]

There is really no guidance for the 1041 in TurboTax Business, but it should not be overly complicated.

[Critter-3]

NONE of the payout is taxable ... ignore the LTC 1099 as it is only informational.  

[tgfirst]

For 1041 (Trust) entry, the 1099-LTC uses father’s SSN as both the Policyholder’s TIN and Insured’s TIN.  For entry in TurboTax Business, do I enter the Trust TIN in place of what is on the 1099-LTC?  And is there any need to show a path to IRS (redirected to Trust IRD) for this 1099-LTC (or explain later if ever asked)?

[tgfirst]

non taxable, on what basis?  the box 3 per diem is checked

[Critter-3 · Accepted solution]

If Box 3 is marked "Per Diem" (which will happen for policies that are considered Indemnity policies) then the amount you may exclude from taxable income being reported is limited.

Because benefits were paid on a per diem (indemnity) basis, without regard to the actual long-term care expenses incurred, the amount of benefits that may be excluded from income is subject to a daily maximum amount.

If this per diem (indemnity) limitation is exceeded, part of the benefits received may be taxable. The amount of the limitation increases every year.

I have never seen any insurance company pay out more the the daily max so none has ever been taxable in my 30+ years in the business and my partner's 45+ years.    https://www.comfortltc.com/news/category/ltc-tax-planning#:~:text=(This%20is%20a%20%2430%2Fday,which....

[tgfirst]

Thank you - It looks like the daily amount ($390/day) provides a good buffer, as a trial on form 8853 shows the line 25 per diem limitation dominating for a $0 taxable payment.  But I presume, I will still need to file an 8853 with the return (1041 Trust, IRD) to take care of the 1099-LTC issued.

[Critter-3 · Accepted solution]

You can if you want however the IRS only requires the payment to be reported ONLY if any of it is taxable ... one of those odd "reverse" rules so file or not it is up to you  ... again partner in the business 45+ years and never had an IRS inquiry for a 1099-LTR not being reported.