IRS Instruction 1098-Q – In the realm of retirement planning, Qualifying Longevity Annuity Contracts (QLACs) offer a strategic way to secure guaranteed income later in life while deferring required minimum distributions (RMDs) from retirement accounts. If you’re an issuer of these contracts or a participant navigating tax reporting, understanding IRS Form 1098-Q and its instructions is essential. This form reports key details about QLACs, ensuring compliance with IRS rules. In this SEO-optimized guide, we’ll break down the latest IRS Instructions for Form 1098-Q (revised April 2025), covering purpose, filing requirements, deadlines, and more. Whether you’re searching for “IRS Form 1098-Q instructions” or “QLAC reporting guidelines,” this article provides actionable insights based on official sources.
What Is IRS Form 1098-Q?
IRS Form 1098-Q, titled “Qualifying Longevity Annuity Contract Information,” is an information return used to report the issuance and status of QLACs. A QLAC is a type of deferred income annuity purchased with funds from qualified retirement accounts like traditional IRAs, 401(k)s, 403(b)s, or 457(b) plans (excluding Roth IRAs). These contracts allow individuals to delay RMDs on a portion of their retirement savings until age 85, providing longevity protection against outliving assets.
The form is filed by the issuer (typically an insurance company or financial institution) and furnished to the participant (the individual who purchased the contract). It does not report taxable distributions but rather tracks the contract’s details, such as premiums paid and annuity start dates, to help the IRS monitor compliance with QLAC rules. Participants receive Copy B for their records, which may assist in tax planning, though the form itself isn’t attached to personal tax returns.
Key benefits of QLACs include:
- Deferring RMDs on up to $210,000 (the 2026 limit, unchanged from 2025) across all eligible accounts.
- Guaranteed lifetime income starting no later than age 85.
- Potential tax advantages by reducing current taxable income calculations.
However, QLACs must meet strict IRS criteria, such as no cash surrender value or commutation benefits (with limited exceptions like a 90-day rescission period).
Who Must File Form 1098-Q?
According to the IRS Instructions for Form 1098-Q, any person or entity that issues a contract intended to be a QLAC must file this form. This applies to contracts purchased or held under:
- Qualified pension or profit-sharing plans (Section 401(a)).
- Annuity plans (Section 403(a)).
- Tax-sheltered annuities (Section 403(b)).
- Individual retirement accounts or annuities (Section 408, excluding Roth IRAs).
- Eligible governmental deferred compensation plans (Section 457(b)).
Filing is required annually starting from the year premiums are first paid and continuing until the year before the participant turns 85 or dies. Even if no new premiums are paid in a given year, the issuer must report the contract’s status.
Participants do not file the form themselves but should retain Copy B for reference. If excess premiums are returned (e.g., to correct overfunding), this may not violate QLAC rules, but it must be reported accurately.
Key Updates in the 2025 Revision of Instructions (Applicable for 2026 Filing)
The April 2025 revision of the instructions applies to tax year 2025 and later, including filings due in 2026. Notable updates from recent years include:
- Premium Limits: The maximum premium for QLACs is $210,000 for 2026, adjusted for inflation under SECURE Act provisions. This is no longer capped at 25% of the account balance.
- Divorce Guidelines: A divorce after purchasing a QLAC with joint and survivor benefits won’t disqualify the contract if certain requirements (e.g., proper beneficiary designations) are met.
- Rescission Rights: QLACs can include a 90-day right to rescind without violating rules.
- Electronic Filing Threshold: Reduced to 10 returns (aggregated across all information returns) for 2026 filings, encouraging e-filing via the IRS’s Information Returns Intake System (IRIS).
These changes reflect ongoing adjustments under the SECURE Acts to make QLACs more accessible.
Filing Deadlines and Requirements for 2026
For tax year 2025 (filed in 2026), adhere to these deadlines:
- Furnish Copy B to Participant: By January 31, 2026.
- File with IRS (Paper): By February 28, 2026.
- File with IRS (Electronic): By March 31, 2026.
If a deadline falls on a weekend or holiday, use the next business day.
Where to File: Send paper forms to the appropriate IRS center based on your location (detailed in Pub. 1220). Electronic filing is mandatory if you have 10 or more returns.
Account Numbers: The IRS recommends assigning an account number to each Form 1098-Q, especially for participants with multiple contracts.
Specific Instructions: How to Complete Form 1098-Q
The form includes issuer and participant details (name, address, TIN), followed by specific boxes. Here’s a breakdown:
| Box | Description |
|---|---|
| 1a | Annuity Amount on Start Date: Enter the monthly annuity payment amount at the contract’s start date. |
| 1b | Annuity Start Date: The date annuity payments are scheduled to begin (no later than age 85). |
| 2 | Check if the Start Date May Be Accelerated: Mark if the contract allows for an earlier start date under certain conditions. |
| 3 | Total Premiums: Cumulative premiums paid for the QLAC to date. |
| 4 | FMV of QLAC: Fair market value of the contract at year-end. |
| 5a–5l | Month-Wise Premiums: Enter premiums paid each month (January to December). |
| dd | Date of Premium Payment: Corresponding dates for monthly premiums in boxes 5a–5l. |
Use the December 2019 form revision with the April 2025 instructions. Corrections can be filed if errors occur in TINs, names, or amounts.
Penalties for Non-Compliance
Failure to file or furnish Form 1098-Q on time can result in penalties:
- $60 per form if filed within 30 days late (max $630,500 for small businesses).
- $120 per form if 31 days late but before August 1 (max $1,891,500).
- $310 per form if after August 1 or not filed (max $3,783,000).
- Additional penalties for failing to provide participant statements.
Intentional disregard can increase penalties. E-filing and timely corrections help avoid issues.
Privacy Act and Paperwork Reduction Act Notice
The instructions include a notice that the IRS uses this information to administer tax laws. Estimated time to complete the form: 7 minutes per return.
Conclusion: Navigating QLAC Reporting for Tax Efficiency
Mastering the IRS Instructions for Form 1098-Q ensures smooth reporting for QLACs, helping issuers comply and participants optimize retirement strategies. With the 2026 premium limit at $210,000 and flexible features like divorce protections, QLACs remain a powerful tool for longevity planning. Always consult a tax professional for personalized advice, and download the latest forms from IRS.gov. For more on “QLAC IRS rules 2026” or “Form 1098-Q filing,” refer to official IRS publications.