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  1. #1
    Semiretired is offline Junior Member
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    Insurance lapse = 1099R ???

    What is the name IL My husband had a life insurance policy for years that was paid for by it's own dividends and we lost track of the whole issue when we moved so didn't know there was a problem. Last year we received notice from irs that our 2008 return had to be amended because of a deficiency. That is because they had gotten a late form 1099R from the insurance company (like in June!) We knew nothing about this and never got any notice or explanation. Their filing told the irs that he received over $9,000 in “retirement income” in 2008, when he actually never received anything at all.
    I’ve been trying to get the insurance co to send us further information for months – about all they say on the phone is the policy has lapsed and is not in effect. They keep promising to send a statement. The irs calculated, from this 1099R that we now owe an additional $1,700 in tax for 2008. (We just finished paying them a large amount for that year that we owed and THOUGHT everything was finally settled – now this!)
    How can the insurance company say that he received ‘retirement income’ when all that happened was the policy lapsed at some point, and in addition to that it was a life insurance policy not retirement pension. I feel they might have sent the wrong form to irs. I know there was a loan on the policy MANY years ago, and read about a ‘taxable event’ but how can we deal with this problem? Is it worth it so go to tax court, we got papers that say we can “petition the tax court” by a certain date …. or would we be better off pursuing some sort of adjustment – especially as our only income is SSD and we never received this $9,000 at any time. Please help !Where should I start?
    of your state (only U.S. law)?
  2. #2
    LdiJ is offline Senior Member
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    Quote Originally Posted by Semiretired View Post
    What is the name IL My husband had a life insurance policy for years that was paid for by it's own dividends and we lost track of the whole issue when we moved so didn't know there was a problem. Last year we received notice from irs that our 2008 return had to be amended because of a deficiency. That is because they had gotten a late form 1099R from the insurance company (like in June!) We knew nothing about this and never got any notice or explanation. Their filing told the irs that he received over $9,000 in “retirement income” in 2008, when he actually never received anything at all.
    I’ve been trying to get the insurance co to send us further information for months – about all they say on the phone is the policy has lapsed and is not in effect. They keep promising to send a statement. The irs calculated, from this 1099R that we now owe an additional $1,700 in tax for 2008. (We just finished paying them a large amount for that year that we owed and THOUGHT everything was finally settled – now this!)
    How can the insurance company say that he received ‘retirement income’ when all that happened was the policy lapsed at some point, and in addition to that it was a life insurance policy not retirement pension. I feel they might have sent the wrong form to irs. I know there was a loan on the policy MANY years ago, and read about a ‘taxable event’ but how can we deal with this problem? Is it worth it so go to tax court, we got papers that say we can “petition the tax court” by a certain date …. or would we be better off pursuing some sort of adjustment – especially as our only income is SSD and we never received this $9,000 at any time. Please help !Where should I start?
    of your state (only U.S. law)?
    I would guess that your husband took out a loan against the cash value of his insurance policy at some point, that was a qualified retirement policy, and never repaid that loan. Therefore eventually the policy got cancellled and the and the loan became income.
  3. #3
    Semiretired is offline Junior Member
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    Ok I think I understand the problem from an insurance co view - but what can I do about the tax problem? That is why I posted here on the tax forum - I don't know what course to follow. Should I file a petition to tax court? Is there any consideration made because any loan money he got was more than 15 years ago (at least) and he didn't get any monies in 2008. We have no money at all, my husband is on a disability retirement. Can the irs help us at all, or is it hopeless?
  4. #4
    davew128 is offline Senior Member
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    What about the tax problem? You owe tax on the income.
  5. #5
    TinkerBelleLuvr is offline Senior Member
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    Your conversations with the company is doing nothing. Send your requests IN WRITING CRRR.
  6. #6
    davew128 is offline Senior Member
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    Quote Originally Posted by TinkerBelleLuvr View Post
    Your conversations with the company is doing nothing. Send your requests IN WRITING CRRR.
    To what end? There was an unpaid policy loan. Policy lapses, outstanding loan in excess of cash basis is income at that time.

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