Form 1099-LTC

[Lion]

I've had clients pay LTC premiums, but now I have a client receiving benefits. $17,000 in Box 1. It's marked Reimbursed amount and Qualified contract and Chronocially ill. I think it's excluded from income.

But, do I report the $17,00 on her return anyplace?

Do, I reduce her medical deductions by the $17,000?

[Lion]

And, yes, I have read through Form 8853. But, she has NO per diem amounts, so it appears the calculations start with $0. Then I get to line 18 where she DOES have a qualified contract...

[FEDUKE404]

Just endure the Form 8853

I have not worked on a Form 8853 for several years, but I seem to recall the purpose of the form (page 2) is essentially to determine how much, if any, of the benefits paid is taxable.

There is some kind of "daily" limitation (which may not even be a factor), but for all intents and purposes if you know what was received from the LTC plan(s), what was spent for qualified care, and the number of days the person was in an eligible care facility, the numbers should work out fairly simply.

I don't recall ever having anyone show a taxable amount, but of course you have to take that with a grain of salt as using Form 8853 for LTC issues is a fairly unusual circumstance.

FE

[WhiteOleander]

I've had clients pay LTC premiums, but now I have a client receiving benefits. $17,000 in Box 1. It's marked Reimbursed amount and Qualified contract and Chronocially ill. I think it's excluded from income.

But, do I report the $17,00 on her return anyplace?

Do, I reduce her medical deductions by the $17,000?

On page 6 of the instructions for form 8853 it states:

"In general, amounts paid under a
qualified LTC insurance contract are
excluded from your income. However, if
you receive per diem payments (defined
next), the amount you can exclude is
limited."
So, since the box for per diem is not marked, the IRS will not ask that the t/p prove the payment can be excluded. Only a certain amt paid per diem is excludable(sp?). Since the insurance reimbursed actual expenses, it is not reported on the return. But, the t/p cannot double dip and use those expenses on Sch A.

[taxxcpa]

I don't think this would be a proper way to do it, but you could inflate each sellers basis to cover everything other than his actual gain from the sale.