Question

How do I deal with an incorrect 1099-R from an insurance company? On the phone they admit there should not have been a 1099, but they have yet to send correction.

Forum|Forum|3 years ago
February 25, 2023
2 replies
0 views

Not even sure what a corrected form would or should show, since there was no payment. But the 1099-R exists, for $25,000!!

TurboTax Self Employed Online

LindaS5247

If this Form 1099-R is incorrect, do not report it on your income tax return. If there were no distributions at all, do not report anything.

If the Form 1099-R is incorrect they should send a corrected one to show $0. This way if the IRS cross references it, it won't get flagged that you did not report it.

Keep records of your communications with your insurance company just in case a question arises later on.

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H

hsmith7143Author

Thank you for the rapid reply. The insurance company is difficult to deal with and makes a lot of mistakes. In the best of all worlds, they may issue a corrected form showing $0, in which case, if I understand correctly, I would file a 1099-R, showing $0 and check that is a Corrected form.

If, however, they do not correct the form -- if they just say, as the woman on the phone did, "No, you shouldn't have gotten it" and, when I pressed, "Well, maybe the tax department can send you a letter saying you should not have gotten it" than am I reading your reply to say that I should just leave off the 1099-R, accumulate letters that I send to the insurance company (and their replies, if any), and then wait for the IRS to query me about a missing 1099-R?

LindaS5247

Yes, if this is something that should not be reported on your tax return, than you should not report it.

If you later receive a question about it from the IRS you will have your documents in a row to show that you are in the right, and that your tried to remedy the problem by requesting a corrected Form 1099-R.

Ask for a letter from the company saying that they erroneously issued a Form 1099 for $25,000 and then properly issued one for 0. Because you may find that the company transmitted the incorrect Form 1099 to the IRS after all. This way you’ll be able to explain it. It's likely the Form 1099-R has already been transmitted to the IRS. The issuer should prepare a Form 1099 in the correct amount and check a “corrected” box on the form. The corrected form is supposed to cancel out the first one in the IRS system, once you give it time to settle. But if they won't cooperate, you should make sure your records reflect what really happened.

Click here for IRS guidance on "What to do if you have not been issued a corrected Form 1099-R."

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D

dmertz

Employee

If the Form 1099-R is incorrect and shows a taxable amount in box 2a, you can't just omit it from your tax return. The IRS will certainly detect it and send you a bill for unpaid taxes.

If the insurance company will not make the correction, you must instead must file a substitute Form 1099-R (Form 4852) where you can provide explanation and show the correct dollar amounts. Form 4852 is prepared in TurboTax by in the 1099-R section marking the box to indicate the you need to file a substitute Form 1099-R. Filing Form 4852 requires filing by mail.

Still, there might be a reason that the Form 1099-R is correct. It's not unusual for front-line reps to provide bad information regarding Forms 1099-R. Was there a transaction associated with this Form 1099-R but that transaction was not supposed to be taxable and, if so, what was the transaction?

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hsmith7143Author

Definitely something happened, although I hesitate to call it a transaction: I was the beneficiary of a non-qualified insurance annuity. I sent in notarized paperwork (insurance-company-provided forms) opting for the 5-Year Deferral Option for this annuity. The 1099-R, however, has 4D in Box 7 (if memory serves), which shows that they think that they made a payout on death. However, I have received no such payout. Nor does their system -- on the authority of whoever is responding to my phone calls -- show that I received a payout. They show that I elected the deferral option.

In the absence of a check and the presence of a 1099-R saying that I did receive $25,000 in a taxable distribution, I appreciate the guidance in tax filing that will give me a chance at staving off a disaster. Paying taxes is, well, paying taxes. But paying taxes on income one has not received ... Oof.

[If you want to know what I think happened, there are multiple beneficiaries for the same policy. I think one of them did get a check in their name, and that the insurance company has improperly connected me to that payout. The number of processing errors that this company has made in the short time I have been in contact with them is truly stunning. You are 100% right that a telephone representative may be incorrect; and in fact these representatives promise paper documentation that never arrives. Alas, what does arrive is often wrong and/or nonsensical, which occasions more phone calls. For example, letters kept arriving saying that they could not talk to me or process my claim in the absence of a death certificate; only by elevating to a higher-level phone representative was I able to get them to link the death certificate that they did have in their system to my claim. Sigh.]