Last Friday, the Internal Revenue Service announced that it has filed for publication the final regulations for section 6050Y: "Information Reporting for Certain Life Insurance Contract Transactions and Modifications to the Transfer for Valuable Consideration Rules." Aside from providing rules-related clarifications, perhaps the biggest takeaway is that the final regulations will grant affected parties extra time to meet reporting requirements.
“The final regulations generally apply to reportable policy sales and payments of death benefits occurring after Dec. 31, 2018,” the IRS said in the release. “The final regulations provide taxpayers additional time to satisfy any reporting obligations for reportable policy sales or death benefit payments made prior to publication of final regulations.”
Those who want to read the final regulations for themselves don't actually have to wait until they're officially published on October 31, 2019. The 120-page “public inspection document” is now available for review on FederalRegister.gov.
According to the preview, public comments contributed to many of the clarifications outlined in the final regulations, including the additional time to comply with reporting requirements: “As requested by one of the commenters, §1.6050Y-1(b)(3), (4), and (5) of the final regulations provide issuers with at least 120 days after the final regulations are published in the Federal Register to file returns and furnish statements under section 6050Y(b) and (c) and §§1.6050Y-3 and 1.6050Y-4 of the final regulations” (2019-23559, p. 6).
When it comes to actually following the reporting requirements, the IRS broadly explains that they apply to “every person who acquires a life insurance contract, or any interest in a contract, in a reportable policy sale during the tax year.”
Other IRS Resources
Linked at the bottom of the press release, the IRS “Tax Reform” page lists resources dedicated to the Tax Cuts and Jobs Act changes. The information is divided into three basic groups—individuals, businesses, and tax-exempt entities—that highlight three common topics for each category.
The IRS also recommended reviewing the following websites:
- About Form 1099-LS, Reportable Life Insurance Sale
- About Form 1099-SB, Seller's Investment in Life Insurance Contract
- About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.