The Internal Revenue Service recently issued final regulations on the new information reporting requirements for certain life insurance contract transactions.
The requirement was authorized under new section 6050Y, added to the Internal Revenue Code by the Tax Cuts and Jobs Act (TCJA), the tax reform legislation enacted in December 2017.
These final regulations generally apply to reportable policy sales and payments of death benefits occurring after Dec. 31, 2018. The final regulations provide taxpayers with additional time to satisfy any reporting obligations for reportable policy sales or death benefit payments made before the publication of final regulations, according to an IRS news release.
Additionally, these reporting requirements have been created to assist people who sell life insurance contracts to properly report any gain from the sale.
Acquiring a Life Insurance Contract
Every person who acquires a life insurance contract, or any interest in a contract, in a reportable policy sale during the tax year is required to file a return with the IRS. The acquirer must also furnish written statements to each payment recipient and the issuer named in the return, the IRS news release added.
The issuer, on receiving such a statement, must then file a return with the IRS and furnish a written statement to the seller. For further details, check out Form 1099-LS, Form 1099-SB, and the instructions, available on IRS.gov.
The final regulations are also said to provide guidance on new reporting requirements applicable to each person who makes a payment of reportable death benefits (see reportable on Form 1099-R) and how to calculate the amount of death benefits excluded from gross income. These final regulations also include definitions relevant to reportable policy sales and exceptions, the IRS added.
For information about other TCJA provisions, visit IRS.gov/tax-reform.
On a sidenote if you are already working on your taxes your Tax Year 2019 Tax Returns are due on April 15, 2020. The 2020 eFile Tax Season begins in January 2020. If you are so inclined to start working on your taxes early can help in the long run rather than waiting until the last minute to file.
Remember that old saying which could apply in this case: “The early bird catches the worm.” Bottomline: if you work in on your taxes and complete them before the usual April deadline you will be ahead of the game and will be able to spend much more time doing the things you enjoy.