IRS Issues Proposed Regulations on New Tax Reform Reporting Requirements for Life Insurance Contract Transactions
Certain life insurance contracts may have reporting requirement changes under the Tax Cuts and Jobs Act (TCJA).
The proposed reporting requirements under Internal Revenue Code 6050Y apply to reportable policy sales and payments of reportable death benefits occurring after Dec. 31, 2017. Consistent with guidance issued last April, the proposed regulations contain transitional guidance delaying any reporting until final regulations are issued. The proposed regulations provide taxpayers additional time to satisfy any reporting obligations for sales or payments made prior to publication of final regulations.
Among other things, these reporting requirements are designed to help persons who sell life insurance contracts properly report any gain from that sale.
Every person who acquires a life insurance contract, or any interest in a life insurance contract, in a reportable policy sale during the taxable year must 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 issuer, upon receiving such a statement, must file a return with the IRS and must also furnish a written statement to the seller. The IRS has released Form and Instructions for 1099-LS and Form and Instructions for Form 1099-SB, which provide specific instructions on these reporting requirements.
The proposed regulations also provide guidance on new reporting requirements applicable to each person who makes a payment of reportable death benefits (reportable on Form 1099-R) and how to calculate the amount of death benefits excluded from gross income.