Form 1099-LS Checklist: 2023 Tax Year Filing Guide
Purpose and Overview
Form 1099-LS reports a reportable policy sale under IRC Section 6050Y when an acquirer purchases a life insurance contract or interest therein. The 2023 version requires acquirers to report the sale price and date, while issuers must file the corresponding Form 1099-SB. This form applies to reportable transactions occurring during the 2023 calendar year. It must be furnished to payment recipients and filed with the IRS by specific deadlines established in the 2023 General Instructions for Certain Information Returns.
Critical Filing Deadlines for 2023 Tax Year
Understanding the distinct deadlines for Form 1099-LS is essential for compliance.
Filing with IRS: February 28, 2024, for paper submissions; April 1, 2024, for electronic filing
Furnishing to Payment Recipients: February 15, 2024, for Copy B
Furnishing to Issuers: January 15, 2024, at the latest for Copy C, subject to specific timing rules based on the later of 20 calendar days after the reportable policy sale or five calendar days after the end of the applicable state law rescission period
Required Steps for 2023 Compliance
Verify Transaction Qualifies
Confirm the transaction qualifies as a reportable policy sale under IRC Section 6050Y per 2023 guidance. A reportable policy sale is the acquisition of a life insurance contract or interest therein where the seller receives cash or other valuable consideration. Certain transfers are excluded, including transfers to family members meeting specific relationship requirements or transfers to charitable organizations as specified in the 2023 instructions. Document which party you represent: acquirer, issuer, or payment recipient.
Obtain and Verify Policy Number
Collect and verify the policy number assigned by the life insurance company. The policy number must appear on Copy A filed with the IRS, Copy B furnished to the payment recipient, Copy C provided to the issuer, and Copy D retained by the acquirer. The 2023 instructions require the complete policy identifier to prevent duplicative or erroneous reporting. This unique identifying number enables proper tracking and coordination between the acquirer’s and issuer’s reporting obligations.
Collect Acquirer Information
Gather the acquirer’s complete taxpayer identification number and full legal name, street address, city, state, ZIP code, country, and telephone number. The acquirer’s complete TIN must be reported on all copies of Form 1099-LS without masking or truncation. Per 2023 guidance, a filer’s TIN may not be truncated on any form. This differs from payment recipient TIN treatment, which permits masking on copies furnished to recipients for privacy protection.
Ensure the acquirer’s information is accurate and consistent across all copies to prevent processing issues and matching discrepancies that could trigger IRS correspondence.
Record Payment Recipient Details
Collect the payment recipient’s complete TIN (SSN, ITIN, ATIN, or EIN) and full name and address. The 2023 instructions clarify that the payment recipient is the person or entity that received the sale proceeds, not necessarily the original policy owner. The complete unmasked TIN must be reported on Copy A filed with the IRS.
Copies B, C, and D furnished to recipients may display only the last four digits of the payment recipient’s TIN for privacy protection. However, Copy A submitted to the IRS must contain the complete unmasked TIN for proper matching and processing.
Enter Transaction Amount
Record the amount paid to the payment recipient in Box 1. This amount represents the total payment made to the payment recipient in the reportable policy sale. Report the gross consideration received for the life insurance contract or interest. The reporting obligation is straightforward and requires reporting the actual amount paid to the payment recipient during the transaction.
Ensure amounts are reported with decimal points and cents portions as required by the General Instructions for information return reporting.
Document Sale Date
Enter the date of sale in Box 2 using the MM/DD/YYYY format. The 2023 General Instructions for Certain Information Returns require the actual closing or transfer date of the reportable policy sale, not the date of the agreement or binding contract. Accurate date reporting is critical because it affects issuer furnishing deadlines and subsequent coordination between acquirer and issuer reporting.
If the transaction involves multiple steps or contingent events, report the date when the reportable policy sale actually occurred and ownership or interest transferred to the acquirer.
Identify Issuer Information
Record the issuer’s name as the insurance company bearing the risk on the life insurance contract. The 2023 instructions clarify that the issuer is the company responsible for administering the contract and paying death benefits, even if different from the original underwriting company. For transactions where administrative responsibility was transferred during the year, verify the correct issuer as of the reportable policy sale date.
The issuer identification enables proper coordination of dual-source reporting, as issuers receiving Form 1099-LS must file the corresponding Form 1099-SB for the same transaction.
Provide Acquirer Contact Information
Include the acquirer’s information, contact name, street address, city, state, ZIP code, country, and telephone number if different from the acquirer’s legal address. The 2023 guidance emphasizes this requirement to ensure payment recipients can direct questions to a responsible contact person, improving compliance and dispute resolution.
This designated contact should be aware of the transaction and have access to supporting documentation to respond promptly to recipient inquiries.
Prepare Required Copies
Create four copies of Form 1099-LS for each reportable sale: Copy A for IRS filing, Copy B for the payment recipient, Copy C for the issuer, and Copy D for the acquirer’s records. Copy A must use scannable official printed forms ordered from the IRS. The 2023 General Instructions explicitly prohibit filing non-scannable downloaded versions of Copy A, warning that penalties may be imposed for submitting forms that cannot be processed by IRS scanning equipment.
Copies B, C, and D may be printed from the IRS website or generated by approved software for furnishing to recipients and retention.
Ensure Information Consistency
Verify that all copies are completed in the same manner and contain identical information for the reportable transaction. The 2023 instructions require consistency across all four copies to prevent discrepancies that trigger IRS matching and adjustment notices. Review each copy before distribution to confirm amounts, dates, TINs, and names match exactly.
Inconsistencies between copies can result in correspondence from the IRS, recipient confusion, and potential penalties for filing incorrect information returns.
File Copy A with IRS
Submit Copy A with the Form 1096 transmittal by February 28, 2024, for paper filing, or April 1, 2024, for electronic filing. Electronic filing requires software that generates files conforming to Publication 1220 specifications. Acquirers filing 10 or more information returns are required to file electronically, unless they are granted a waiver.
Determine filing method early in the process to ensure compliance with applicable deadlines and technical requirements for electronic submission.
Furnish Copy B to Payment Recipient
Provide Copy B to the payment recipient by February 15, 2024. This copy informs the recipient of the reported amount and provides information necessary for their tax return preparation. If the recipient is a nonresident alien, verify whether special withholding or reporting rules apply under 2023 FATCA and nonresident alien guidance. Nonresident alien recipients may have additional documentation requirements and potential backup withholding obligations.
Ensure timely furnishing to avoid penalties and provide recipients with adequate time to prepare their tax returns with complete information.
Furnish Copy C to Issuer
Deliver Copy C to the issuer by January 15, 2024, at the latest, observing special timing rules. The form must be furnished by the later of 20 calendar days after the reportable policy sale or five calendar days after the end of the applicable state law rescission period, provided that the calculated date occurs before January 15, 2024. This accelerated timeline exists because issuers must use information from Copy C to prepare and file their own Form 1099-SB submissions.
Key Regulatory Requirements for 2023
Scannable Form Enforcement
The 2023 General Instructions for Certain Information Returns reiterate that only official IRS-printed Copy A forms featuring red scannable formatting are acceptable for filing with the IRS. Penalties may be imposed for non-scannable downloads, as referenced in Publication 1141 and the 2023 guidance. To avoid the risk of penalties, order official scannable forms from the IRS or choose electronic filing.
Website-printed versions of Copy A lack the precise red-ink specifications required for IRS scanning equipment and will be rejected, resulting in penalty assessments.
IRC Section 6050Y Clarification
The 2023 instructions confirm that reportable policy sales include any acquisition of a life insurance contract or interest, encompassing partial interests, fractional ownership, and future payment rights, where the seller receives valuable consideration. Specific transfers are excluded, including certain family transfers that meet relationship requirements, as well as transfers to qualified charitable organizations.
Understanding which transactions qualify as reportable policy sales prevents under-reporting or erroneous filing.
Form 1099-SB Coordination
The 2023 General Instructions clarify that issuers receiving Form 1099-LS from acquirers must file Form 1099-SB to report the same reportable policy sale. This dual-source reporting ensures that the IRS receives information from both the acquirer’s and issuer’s perspectives, enabling proper matching and verification of reportable transactions.
Acquirers should be aware that their Form 1099-LS filing triggers the issuer’s corresponding reporting obligation.
TIN Masking and Privacy Rules
The 2023 instructions confirm that Copies B, C, and D furnished to recipients and issuers may display only the last four digits of the payment recipient’s TIN for privacy protection. However, Copy A filed with the IRS must contain the complete unmasked payment recipient TIN for proper matching.
Critically, the acquirer’s TIN must never be masked or truncated on any copy of Form 1099-LS. A filer’s TIN may not be truncated on any form according to 2023 guidance.
Nonresident Alien Payment Recipients
When the payment recipient is a nonresident alien without a U.S. SSN, the acquirer must report an ITIN or applicable EIN on Form 1099-LS. The acquirer may be subject to backup withholding or FATCA reporting requirements on the transaction.
Review applicable guidance for nonresident alien payees to ensure compliance with withholding and reporting obligations that may apply in addition to Form 1099-LS filing.
Best Practices and Recommendations
Maintain Thorough Documentation
Keep complete records of all reportable policy sales throughout 2023, including transaction documentation, policy information, payment records, and correspondence with all parties. These records support your Form 1099-LS reporting and provide evidence of compliance if questions arise during IRS examinations or recipient inquiries.
Create Deadline Calendar
Establish a comprehensive filing calendar, noting January 15, 2024, for issuers, February 15, 2024, for payment recipients, and either February 28 or April 1, 2024, for IRS filing, depending on the submission method. Build buffer time into internal processes to accommodate corrections, questions, or unexpected delays before deadlines expire.
Verify TIN Accuracy
Confirm all taxpayer identification numbers are accurate before filing. Use IRS TIN Matching services when available to validate TINs against IRS records. Incorrect TINs trigger backup withholding notices and information return penalties. Taking time to verify accuracy before submission prevents costly corrections and penalty assessments.
Consider Electronic Filing
Evaluate whether electronic filing suits your organization’s needs. Electronic filing provides an extended April 1 deadline, eliminates concerns about scannable forms, offers faster processing, and provides immediate transmission confirmation. For organizations filing 10 or more returns, electronic filing is mandatory unless a waiver is obtained.
Review Before Distribution
Conduct thorough reviews of completed forms before submitting them to the IRS and furnishing them to recipients. Verify all required fields are complete, amounts include proper decimal formatting, dates use the correct format, and TINs are accurate. Ensure that the information is consistent across all four copies. Review reduces the need for amended returns and prevents confusion among recipients.
Quick Reference Summary
Tax Year: 2023 calendar year transactions
IRS Filing: February 28, 2024 (paper) or April 1, 2024 (electronic)
Payment Recipients: February 15, 2024
Issuers: January 15, 2024 (subject to transaction-specific timing rules)
Copy A Source: Official IRS scannable stock or electronic filing only
Acquirer TIN: Must appear complete on all copies; never masked
Payment Recipient TIN: Complete on Copy A; may show last four digits on Copies B, C, D
Box 1: Total payment to payment recipient
Box 2: Actual closing/transfer date in MM/DD/YYYY format
Keep copies of all submitted forms and supporting documentation for compliance verification and potential future reference.
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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.
