I received a 1099-misc for refund of premiums after cancellation of the long term care policy. Is this taxable? How about the $300,000 worth of benefits lost after 20 years of payments? Cancellation due to outrageous rate increases no longer affordable.
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The premium refund would not be taxable, assuming you didn't deduct the premium payments. You may have deducted the payments as medical expenses if you itemize your deductions. If so, you would need to include the premiums in income to the extent they were deducted on schedule A of your tax return and afforded you a tax benefit. If you itemize your deductions, I suggest you prepare an amended return for the years you deducted the premiums and remove the premiums to see if your tax increased. If not, then the premium reimbursement would not be taxable.
You need to report the premium reimbursement as income by entering the Form 1099-MISC in TurboTax in the Other Common Income section of TurboTax, in the Wages and Income area. Then, follow these instructions to enter a negative adjustment to income to back out the portion of the income that is not taxable:
1. From the Federal menu in TurboTax find Wages and Income
2. Find Less Common Income
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other Reportable Income
5. Enter a description of the income and the adjustment as a negative number
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