1099R Life Insurance Questions

[statusquo]

So I have a question regarding my life insurance1099R with these info:

Box1: 100

Box 2a: 0

Box 2b: Blank

 Box 7: W (charges or payments for purchasing qualified long-term care insurance contracts under combined arrange)

IRA/SEP/SIMPLE: is NOT checked

Box 8 (Other): 100

I have the downloaded/CD version (if that matters)

I have questions regarding the questions that Turbotax asks after filling out the 1099-R and clicking "Continue". After verifying a few  things, I get to this question

>>> What did you do with your money from <Life Insurance> Company?

It seems  to have two options

1. I moved the money to another retirement account (or returned it to the same retirement account)/
2. I did something else with it (cashed out, etc)

It seems both cases could be valid as long as it makes sense.

For example, if I pick option 1, then it will ask me to choose two options:

>> 1. I rolled over all of this money to an IRA or other retirement account (or returned it to the same account)

>> 2. I did a combination of rolling over, converting, or cashing out the money

Of course option 1 seems to make sense to me since the "distribution" is being sent back to the same account to pay for the long-term care (code W)

Clicking continue will return

>> You won't have to pay tax on your $100 rollover from <Life Insurance> Company

Now if I pick option 2 above which is

>>> I did something else with it (cashed out, etc)      ---- seems turbotax needs more examples than the "etc"

Click continue and it will ask for the periodic payments

>>> Yes, I got regular payments from this retirement account

>>> No, I didn't get regular payments from this retirement account

Of course, I pick No.

In either cases, there is no additional tax. However, does it matter which options I select?

1. I moved the money to another retirement account (or returned it to the same retirement account)/
2. I did something else with it (cashed out, etc)

What is the implication of either selections that I described above?

It seems option 1 makes more sense to me since I actually never saw the money and the insurance company uses it to pay for the long term life care thing.

The only thing is I remember picking option 2 last year for 2019 tax. I picked option 1 this year with the selections I mentioned above.

Appreciate the help!

[macuser_22 · Accepted solution]

Since you did not keep the money yourself and put it back in the account, it is #1 - a rollover.

[statusquo]

So that's what I did in my current 2020 tax, which is

>>> What did you do with your money from <Life Insurance> Company?

1. I moved the money to another retirement account (or returned it to the same retirement account)/
2. I did something else with it (cashed out, etc)

I picked option 1 and then option 1 again in the follow up options (which is I rolled over all of this money to an IRA or other retirement account (or returned it to the same account))

But in my 2019 return, I picked option 2 (I did something else...) and then "No, I didn't get regular payments from this retirement account".

Is that a concern that requires 2019 tax amendment? 

[macuser_22]

That would depend if there was an amount on the 2019 1040 line 4d that you paid an unnecessary tax on.

[statusquo]

yeah, I have $8 on 4d in 2019 Form 1040.

update: so after checking, this is an amount from my 401K that I rolled over to rollover IRA in mid of 2019 after I left my previous job in 2019. I think this came from an interest and they sent me a check.

Code 1 in box 7 with federal tax withheld in box 4 and 2b box "total distribution" is checked

As for the 1099R from the life insurance company, that is not taxed at all when I used the options I mentioned

>>> I picked option 2 (I did something else...) and then "No, I didn't get regular payments from this retirement account".

[macuser_22]

Hardly worth the trouble of amending.    That would lower your taxable in come by $8.   Depending on your tax bracket you might get a refund of a few dollars.

[statusquo]

Sorry, while you were typing, I updated my last comment where that taxable amount comes from, which wasn't from the 1099R from the insurance company.

[macuser_22]

Then you should be fine.

[statusquo]

Thanks for the help!

So just wanted to recap...

I know you mentioned 

>>> Since you did not keep the money yourself and put it back in the account, it is #1 - a rollover.

which is what I'm doing this year for my 2020 tax year.

But it seems that it is still fine to select the options that I did in 2019 tax for my 1099R from my life insurance company even though I never receive the money since it's code W that is being used to paid for the long term life care thing.

>>> I picked option 2 (I did something else...) and then "No, I didn't get regular payments from this retirement account".

Is that right?

[macuser_22]

---

@statusquo wrote:

Thanks for the help!

So just wanted to recap...

I know you mentioned 

>>> Since you did not keep the money yourself and put it back in the account, it is #1 - a rollover.

which is what I'm doing this year for my 2020 tax year.

But it seems that it is still fine to select the options that I did in 2019 tax for my 1099R from my life insurance company even though I never receive the money since it's code W that is being used to paid for the long term life care thing.

>>> I picked option 2 (I did something else...) and then "No, I didn't get regular payments from this retirement account".

Is that right?

---

Yes that is right.    It is the zero in box 2a and code W that makes it not taxable.

[statusquo]

@macuser_22 

So it seems that my Mac Turbotax does not like going with that route because it seems that is a full rollover if the code W is in box 7.

I'm on last steps which Turbotax is checking for errors and I get

Check This Entry

Form 1099-R (<insurance company>): Full rollover box should no tbe checked if there is code 'W' in box 7.

<checkbox with checked> Full rollover

Is this a bug? Obviously I didn't see a checkbox with checked on it with "Full rollover" statement.

I would think it meant what I did was 

>>> What did you do with your money from <Life Insurance> Company?

1.I moved the money to another retirement account (or returned it to the same retirement account)/

2. I did something else with it (cashed out, etc)

I picked option 1 and then option 1 again in the follow up options (which is I rolled over all of this money to an IRA or other retirement account (or returned it to the same account))

So it seems to not like Option 1 (I moved the money to another retirement account( or returned it to the same retirement account...) and option 1 again if box 7 is W.

Do you have any idea?

[statusquo]

@macuser_22 

well, I went back and checked, it seems to rollback my changes to what I did in 2019...

[macuser_22 · Accepted solution]

You should delete the 1099-R and re-enter.    Check the LOWER box "I did something else".   After thinking about it, this is NOT a rollover, It is a purchase of long term insurance.  

[statusquo]

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@macuser_22 wrote:

You should delete the 1099-R and re-enter.    Check the LOWER box "I did something else".   After thinking about it, this is NOT a rollover, It is a purchase of long term insurance.  

---

Unchecking the "<checkbox with checked> Full rollover" pretty much did that as part of the Turbotax error check. I verified it after doing that and it seems to be aligned with what I did in 2019. I wonder if that also happened last year so that's why I did what I did. 

Thanks a lot for your help. Having you guys in this community is just awesome!