Instructions For Form 1099-Ltc - 2006 (Page 4 of 26) in pdf

2006

Department of the Treasury

Internal Revenue Service

Instructions for Form

1099-LTC

Section references are to the Internal Revenue Code.

amounts paid in viatical settlement transactions with chronically

Reminder

ill individuals.

In addition to these specific instructions, you should also use

the 2006 General Instructions for Forms 1099, 1098, 5498, and

However, if a state enacts a licensing requirement but

W-2G. Those general instructions include information about:

does not permit viatical settlement providers to engage

•

Backup withholding

in business until the licenses are granted, the provider

CAUTION

•

Magnetic media and electronic reporting requirements

will not be considered as licensed under section

•

Penalties

101(g)(2)(B)(i)(I). See Rev. Rul. 2002-82, which is on page 978

•

Who must file (nominee/middleman)

of Internal Revenue Bulletin 2002-51 at

•

When and where to file

irs-irbs/irb02-51.pdf.

•

Taxpayer identification numbers

•

Qualified Long-Term Care Insurance Contract

Statements to recipients

•

Corrected and void returns

A contract issued after 1996 is a qualified long-term care

•

Other general topics

insurance contract if it meets the requirements of section

7702B, including the requirement that the insured must be a

You can get the general instructions from the IRS website at

chronically ill individual (see Chronically ill Individual below). A

or by calling 1-800-TAX-FORM (1-800-829-3676).

contract issued before 1997 generally is treated as a qualified

long-term care insurance contract if it met state law

requirements for long-term care insurance contracts and it has

Specific Instructions for Form 1099-LTC

not been materially changed.

File Form 1099-LTC, Long-Term Care and Accelerated Death

Accelerated Death Benefits

Benefits, if you pay any long-term care benefits.

An accelerated death benefit is any amount paid under a life

insurance contract for an insured individual who is terminally or

Long-Term Care Benefits

chronically ill. It also includes any amount paid by a viatical

Long-term care benefits means —

settlement provider for the sale or assignment of a death benefit

1. Any payments made under a product that is advertised,

under a life insurance contract for a chronically or terminally ill

marketed, or offered as long-term care insurance (whether

individual.

qualified or not) and

Chronically ill Individual

2. Accelerated death benefits (excludable in whole or in part

from gross income under section 101(g)) paid under a life

A chronically ill individual is someone who has been certified (at

least annually) by a licensed health care practitioner as —

insurance contract or paid by a viatical settlement provider.

1. Being unable to perform, without substantial assistance

from another individual, at least two daily living activities

Who Must File

(eating, toileting, transferring, bathing, dressing, and

File Form 1099-LTC if you paid any long-term care benefits,

continence) for at least 90 days due to a loss of functional

including accelerated death benefits. Payers include insurance

capacity or

companies, governmental units, and viatical settlement

2. Requiring substantial supervision to protect the individual

providers.

from threats to health and safety due to severe cognitive

impairment.

Viatical Settlement Providers

A viatical settlement provider is any person who —

Terminally ill Individual

1. Is regularly engaged in the trade or business of

A terminally ill individual is someone who has been certified by

purchasing or taking assignments of life insurance contracts on

a physician as having an illness or physical condition that can

the lives of terminally or chronically ill individuals and

reasonably be expected to result in death in 24 months or less.

2. Is licensed in the state where the insured lives. If

Reporting

licensing is not required in the state, the provider must meet

other requirements (including those below) depending on

Report payments only if the policyholder is an individual.

whether the insured is terminally or chronically ill.

Reportable payments are those made to the policyholder, to the

insured, or to a third party.

a. If the insured is terminally ill, the provider must meet the

requirements of sections 8 and 9 of the Viatical Settlements

You may report benefits paid from each contract on a

Model Act of the National Association of Insurance

separate Form 1099-LTC. At your option, you may aggregate

Commissioners (NAIC), relating to disclosure and general rules.

benefits paid under multiple contracts on one Form 1099-LTC if

The provider must also meet the requirements of the Model

the same information is reportable on the form for each contract

Regulations of the NAIC for evaluating the reasonableness of

(other than the amount of benefits paid).

amounts paid in viatical settlement transactions with terminally

Policyholder

ill individuals.

b. If the insured is chronically ill, the provider must meet

The policyholder is the individual who owns the contract,

requirements similar to those of sections 8 and 9 of the Viatical

including the owner of a contract sold or assigned to a viatical

Settlements Model Act of the NAIC and must also meet any

settlement provider. In the case of a group contract, the term

standards of the NAIC for evaluating the reasonableness of

policyholder includes the certificate holder (or similar

Cat. No. 27981Y

Instructions For Form 1099-Ltc - 2006 Page 4

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