Form 1099-LS Checklist for Tax Year 2019
Form 1099-LS reports reportable policy sales under IRC Section 6050Y for the 2019 tax year. Acquirers must furnish this form to payment recipients and issuers when a life insurance contract or interest therein is acquired in a reportable policy sale. Understanding proper completion and filing procedures ensures compliance with federal information reporting requirements.
Understanding Section 6050Y Requirements
The Tax Cuts and Jobs Act, enacted on December 22, 2017, included section 6050Y. The provision became effective for reportable policy sales occurring after December 31, 2017, making 2018 the first full calendar year of reporting. The 2019 tax year represents the second full year under these reporting requirements.
Form 1099-LS and its companion, Form 1099-SB, are the information returns required under Section 6050Y. Acquirers file Form 1099-LS to report their acquisition of life insurance contracts, while issuers separately file Form 1099-SB to report the same transactions from the issuer perspective.
Verifying Reportable Policy Sale Status
Confirm the transaction qualifies as a reportable policy sale under Section 6050Y. In simple terms, a reportable policy sale happens when someone buys any part of a life insurance contract and does not have a significant family, business, or financial connection to the insured person, other than their interest in the life insurance contract.
The acquisition of an interest in a partnership, trust, or other entity that holds an interest in a life insurance contract may constitute an indirect acquisition, requiring Form 1099-LS reporting. Certain exceptions may apply based on specific circumstances outlined in Treasury Regulations.
Verify you are the acquirer who acquired the life insurance contract or interest during calendar year 2019. The acquirer is any person who acquires an interest in a life insurance contract through direct or indirect acquisition in a reportable policy sale.
You may not need to file if the interest was transferred gratuitously, if you qualify for certain regulatory exceptions, or if another acquirer reports on your behalf under unified reporting provisions.
Gathering Required Information
Payment Recipient Identification
Obtain the complete and correct Taxpayer Identification Number of the payment recipient. The payment recipient is any person who receives a reportable policy sale payment in the transaction, which typically includes the seller transferring the interest in the life insurance contract.
A payment recipient may also include any broker or intermediary retaining a portion of the cash or other consideration transferred in the reportable policy sale. However, a person other than the seller is not a payment recipient if that person received aggregate payments of less than 600 dollars with respect to the reportable policy sale.
For 2019, you must report the full TIN to the IRS on Copy A. Copies B and C may truncate the TIN to display only the last four digits for recipient protection purposes under privacy regulations. The acquirer’s TIN may never be truncated on any version of the form.
Policy Information
Obtain and verify the policy number assigned by the life insurance company issuer. The policy number is the unique identifying number assigned to the life insurance contract. This number must match the contract records held by the issuer as of the date of sale to ensure proper coordination between Form 1099-LS and Form 1099-SB filings.
Identify the issuer correctly. The issuer is the person responsible for administering the life insurance contract, including collecting premiums and paying death benefits under the contract, on the date Form 1099-LS is required to be furnished under Section 6050Y, or their designee.
Completing Form 1099-LS
Acquirer Information
Enter the acquirer’s complete name, street address, city, state, ZIP code, country if non-U.S., and telephone number in the designated header fields. The acquirer is the individual or entity purchasing the policy interest from the payment recipient in the reportable policy sale.
If your contact information differs from the acquirer’s address, provide the contact person’s name, address, and telephone number separately. This field is optional but recommended to facilitate questions from the recipient and issuer about the transaction.
Box 1: Amount Paid to Payment Recipient
Calculate and enter the exact amount paid to the payment recipient. Include all cash, property, and other consideration received by the payment recipient in the reportable policy sale. Report the total amount before any basis calculations or adjustments.
The acquirer is not required to report this payment amount to the issuer of the life insurance contract. Therefore, reporting the amount paid to the payment recipient is optional on Copy C furnished to the issuer, though all other transaction information must be provided.
Box 2: Date of Sale
Record the date of sale using the MM/DD/YYYY format. The date must reflect the transaction closing date or the date when legal title was transferred in 2019. This is the date the reportable policy sale occurred, not the original contract issue date.
Enter the actual date when the acquisition was completed, and ownership or beneficial interest in the life insurance contract was transferred to the acquirer.
Form Preparation and Distribution
Copy A for IRS Filing
Prepare Copy A using the scannable red version officially printed by the IRS. Do not download and print Copy A from the IRS website, as non-scannable versions may trigger penalties under information return filing penalties for 2019.
The IRS does not provide a fill-in form option for Copy A. Filers must obtain officially printed forms or file electronically via the Filing Information Returns Electronic system or the Affordable Care Act Information Returns system, following the specifications in Publication 1220.
Attach Copy A to Form 1096, Annual Summary and Transmittal of U.S. Information Returns. Form 1096 serves as the transmittal document summarizing the information returns being filed.
File Copy A with the IRS by February 28, 2020, if filing on paper, or by March 31, 2020, if filing electronically.
Electronic filing is required if you are filing 250 or more information returns of any single type. Mail paper submissions to the appropriate IRS Service Center based on your geographic location as specified in the General Instructions for Certain Information Returns.
Copy B to Payment Recipient
Furnish Copy B to the payment recipient by January 31, 2020. This deadline applies to most Forms 1099 for the 2019 tax year unless specific guidance provides an exception.
Include the required statement on Copy B: “This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this item is required to be reported and the IRS determines that it has not been reported.”
You may furnish Copy B electronically if the payment recipient has affirmatively consented to receive the statement in electronic format. Follow the electronic furnishing requirements outlined in the General Instructions for Certain Information Returns. The payment recipient uses Copy B to determine their taxable gain or loss from the reportable policy sale based on their adjusted basis in the life insurance contract.
Copy C to Issuer
Furnish Copy C to the issuer by January 31, 2020. Copy C is informational and helps the issuer fulfill its separate reporting obligation under Section 6050Y(b). The requirement to furnish Copy C to the issuer applies only with respect to Form 1099-LS filed for the seller and only if your acquisition of an interest in a life insurance contract in a reportable policy sale is a direct acquisition. Statements furnished to the issuer should be directed to the administrative office that processes transfers of ownership pursuant to the life insurance contract.
The issuer must file Form 1099-SB with the IRS separately, under Section 6050Y(b), to fulfill its reporting obligations. Copy C provides the issuer with the necessary information to prepare their filing and ensures coordination between the acquirer’s and issuer’s reports of the same transaction.
Copy D for Records
Retain Copy D for your files. Maintain copies of all Forms 1099-LS filed along with supporting documentation according to standard tax record retention practices. Keep records for at least four years from the due date of the return or the date the return was filed, whichever is later.
Corrected Returns
If you discover an error on a previously filed 2019 Form 1099-LS, you must issue a corrected return. Mark the CORRECTED checkbox prominently on all copies being filed or furnished.
File the corrected Copy A with the IRS attached to Form 1096, following the same procedures as original returns. Furnish corrected Copies B and C to the payment recipient and issuer with the CORRECTED box checked.
No separate corrected form designation, such as Form 1099-LS-X, exists. Corrections are reported by issuing a new Form 1099-LS clearly marked as corrected to distinguish it from the original filing.
Rescission Requirements
If a reportable policy sale is rescinded and you have filed Form 1099-LS with respect to the reportable policy sale, you must file a corrected Form 1099-LS within 15 calendar days of receipt of notice of the rescission.
If you have furnished a statement with respect to the reportable policy sale to a payment recipient or issuer, you must furnish the recipient of that statement with a corrected statement within 15 calendar days of receipt of notice of the rescission.
Extension Requests
You can request an automatic 30-day extension of time to file Form 1099-LS with the IRS by completing Form 8809. Submit Form 8809 by the original due date of the returns to obtain the automatic extension.
The extension applies only to filing Copy A with the IRS, not to the requirement to furnish Copies B and C to recipients and issuers. The January 31, 2020, deadline for furnishing statements to payment recipients and issuers remains firm, unless you can demonstrate undue hardship that justifies an extension.
Form 8809 may be submitted on paper or filed electronically through the FIRE system. Under certain hardship conditions, you may apply for an additional 30-day extension beyond the initial automatic extension.
Key 2019 Compliance Points
Continuous Use Format
Form 1099-LS and its instructions have been converted from an annual revision format to a continuous use format. Both the form and instructions are updated as needed rather than on a fixed annual schedule. Always verify you are using the most recent version available at IRS.gov.
Online Fillable Copies
Copies B, C, and D have been made fillable online in PDF format to ease statement-filing requirements. You can complete these copies electronically for furnishing statements to recipients and retaining them in your files. However, Copy A filed with the IRS must be the official scannable version or filed electronically.
Payment Recipient Definition
The definition of payment recipient under Section 6050Y includes the original policyholder or contract owner who sells or surrenders the policy to the acquirer. For 2019, ensure the payment recipient is identified as the party receiving consideration in the reportable policy sale, not an intermediary broker unless that intermediary retains a portion of the consideration.
If multiple parties receive payments in a reportable policy sale, file a separate Form 1099-LS for each payment recipient with respect to the interest in the life insurance contract acquired, unless an exception applies.
No Threshold Amount
Section 6050Y applies to all reportable policy sales occurring in 2019, regardless of the amount paid. No grandfather period or threshold dollar amount limits reporting requirements. All qualifying sales must be reported, regardless of the amount paid.
TIN Truncation Rules
Pursuant to Treasury Regulations, all filers of Form 1099-LS may truncate the payment recipient’s TIN on statements furnished to them in Copy B. Display only the last four digits to protect sensitive personal information.
Truncation is not allowed on any documents filed with the IRS. Copy A must contain the complete TIN. The acquirer’s TIN may never be truncated on any version of the form.
Unified Reporting Provisions
You may not have to file Form 1099-LS if another acquirer or third-party information reporting contractor reports on your behalf under the unified reporting provisions of Treasury Regulations. Similarly, you may not have to furnish statements to the payment recipient and issuer if another acquirer or contractor reports on your behalf.
If you qualify for unified reporting, verify that the designated reporting party is filing on your behalf and that all required information is accurately reported.
Regulatory Exceptions
You may not have to file Form 1099-LS if you qualify for certain regulatory exceptions. These include exceptions for foreign persons, situations where you report reportable policy sale payments made to a person other than the seller under other reporting sections, or where you acquire a life insurance contract in a tax-free exchange under Section 1035.
Review the applicable Treasury Regulations to determine whether any exceptions apply to your specific transaction before concluding that you are not required to file.
Form 1099-LS represents a critical component of the information reporting framework for life insurance transactions. Proper completion and timely filing ensure compliance with Section 6050Y requirements while providing payment recipients and issuers with necessary tax information for the 2019 tax year.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
