IRS Instruction 1099-LTC – Navigating tax forms related to long-term care insurance and accelerated death benefits can be complex, but understanding IRS Form 1099-LTC is essential for payers and recipients alike. This form reports payments made under long-term care insurance contracts or as accelerated death benefits, helping ensure compliance with federal tax regulations. In this comprehensive guide, we’ll break down the latest IRS instructions for Form 1099-LTC (Revised April 2025), covering who must file, what to report, due dates, and more. Whether you’re an insurance company, viatical settlement provider, or policyholder, this article provides the insights you need for the 2025 tax year.
What Is IRS Form 1099-LTC?
Form 1099-LTC, titled “Long-Term Care and Accelerated Death Benefits,” is an information return used to report payments made to individuals under long-term care insurance policies or as accelerated death benefits from life insurance contracts. These payments may include benefits for chronically or terminally ill individuals and are often excludable from gross income under specific IRS rules, such as Section 101(g) for accelerated death benefits or Section 7702B for qualified long-term care contracts.
The form helps the IRS track these benefits to determine their tax implications. For recipients, receiving a 1099-LTC doesn’t necessarily mean the amounts are taxable—many long-term care benefits are tax-free if they meet qualification criteria—but it signals the need to review them during tax preparation. Payers must issue this form for payments made during the tax year, ensuring accurate reporting to both the IRS and the policyholder.
Key updates for 2025: The instructions, revised in April 2025, apply to tax year 2025 and beyond until superseded. Due to low filing volume, the IRS offers an online fillable format for Copy B, simplifying distribution to recipients.
Who Must File Form 1099-LTC?
Payers required to file Form 1099-LTC include:
- Insurance companies providing long-term care insurance.
- Governmental units administering long-term care programs.
- Viatical settlement providers, who purchase or assign life insurance contracts for terminally or chronically ill individuals.
Filing is mandatory if any long-term care benefits or accelerated death benefits are paid during the year, but only if the policyholder is an individual. No filing is required for non-individual policyholders, such as corporations or trusts.
A viatical settlement provider must be licensed in the state where the insured resides or meet alternative IRS requirements, including adherence to the National Association of Insurance Commissioners (NAIC) Model Act standards for disclosures and payment reasonableness.
Key Definitions in the 1099-LTC Instructions
Understanding these terms is crucial for accurate reporting:
- Long-Term Care Benefits: Payments under contracts marketed as long-term care insurance, whether qualified or not. Qualified contracts (issued after 1996) must meet Section 7702B requirements, including certification that the insured is chronically ill.
- Accelerated Death Benefits: Payments made under a life insurance contract to a terminally or chronically ill insured, or through viatical settlements.
- Chronically Ill Individual: Someone certified by a licensed health care practitioner as unable to perform at least two activities of daily living (e.g., eating, bathing) for at least 90 days, or requiring supervision due to severe cognitive impairment.
- Terminally Ill Individual: Certified by a physician as having an illness expected to result in death within 24 months.
Pre-1997 contracts may qualify if they met state laws at issuance and haven’t been materially changed.
How to Fill Out Form 1099-LTC: Box-by-Box Guide?
Form 1099-LTC includes payer and recipient details (names, addresses, TINs) and the following boxes:
| Box Number | Description | Details |
|---|---|---|
| Box 1 | Gross Long-Term Care Benefits Paid | Total benefits paid under a long-term care contract (excluding accelerated death benefits), including per diem or reimbursed amounts. No need to assess taxability. |
| Box 2 | Gross Accelerated Death Benefits Paid | Total amounts paid for terminally or chronically ill insureds under life insurance or viatical settlements. |
| Box 3 | Per Diem or Reimbursed Amount | Check if payments were per diem (fixed amount) or reimbursed (actual expenses). Do not check for terminally ill accelerated benefits. |
| Box 4 | Qualified Contract (Optional) | Check if benefits are from a qualified long-term care insurance contract. |
| Box 5 | Chronically Ill or Terminally Ill (Optional) | Check the applicable status and enter the latest certification date. |
Include an account number if the payer has multiple accounts for the recipient. Truncate the recipient’s TIN on statements per IRS rules, but not on IRS filings. Report payments separately per contract or aggregate if details match (except amounts).
Statements must be furnished to the policyholder (Copy B) and insured (Copy C, if different). If the policyholder is the insured, one Copy B suffices.
Due Dates and Filing Methods for 2025
- Recipient Statements: Due by January 31, 2026, for 2025 payments.
- IRS Filing: Electronic filing due by March 31, 2026; paper filing (if allowed) by February 28, 2026.
Electronic filing is encouraged and required for 10+ returns. Use the IRS FIRE system or IRIS portal. For paper, submit Copy A with Form 1096. Due to low volume, paper Forms 1099-LTC can be printed from IRS.gov and filed with a printed Form 1096.
Penalties for Non-Compliance
Failure to file or furnish correct forms can result in penalties ranging from $60 to $630 per form, depending on timing and intent. Additional penalties apply for missing TINs or backup withholding issues. Refer to the General Instructions for Certain Information Returns for full details.
Recent Updates and Additional Resources
The April 2025 revision emphasizes online fillable forms and references to IRS.gov for the latest developments. No major changes from prior years are noted, but always check IRS.gov/Form1099LTC for updates. For more on tax treatment, see IRS Publication 525 (Taxable and Nontaxable Income).
If you’re a recipient, consult a tax professional to determine if benefits are taxable. Resources like TaxAct or the American Association for Long-Term Care Insurance provide helpful overviews.
Staying compliant with IRS Form 1099-LTC ensures smooth tax reporting for long-term care and accelerated death benefits. Download the official instructions and form from IRS.gov to get started.