A life paid-up at 65 is NOT necessarily an endowment (which WOULD be taxable) ... It DOES turn exactly on what the IRS agent asked, whether it endowed and he got a check or it's simply paid-up, (which means that he has a paid up life insurance policy on himself that will pay a beneficiary upon is death)
I see you're typing. I'll wait
he was told the dividend is paying the policy now . he is age 60
That's right. The policy is has been put on a dividend option that pays the cost of insurance (the pure cost to keep the premium in force until he dies), ......... SO, it is NOT taxable to him as what's called an endowment.....
Do you know what the death benefit is?
the face amount of the policy is 50000
Do you know anything about the terms under which they "signed over the policy" to him for example, was he allowed to change the beneficiary? If so, and he became the owner of the policy AND the contract was part of a non-qualified deferred compensation plan, the this could be legitimate..... under non-qualified deferred compensation plans the taxation is deferred until paid out and THE when paid out the employee can be liable.... HOWEVER if the policy is in force and there has been NO cash withdrawn that can complicate things even further ........... Very important question: Has he received and CASH from the policy?
the woman at irs .said he would have to go to former employer and get something in writing stating he did not recieve monitary .the former employer is 2nd generation owner my dad was fired after 39 years of service and really is trying any other way than to have to go back there
So the answer is no? ... no cash received?
no cash recieved and was allowed to change benificary .the policy is now in his name
If he never received anything monetary ... he DOES have recourse .... The 1099 was done in error (maybe even with malice)
He needs to follow a procedure for what's called a 1099 complaint
Just a sec and I'll get that for you
Step 1: He does have to show that he made an effort to get the company to correct the 1099: "Contact your employer to notify them of the error and request a corrected 1099 form. You may need to speak with your boss, the accounting department or payroll. It helps if you have kept all of your payroll stubs or have bank statements showing all of the company's direct deposits into your bank account." .... Given your situation I would just send a certified letter, return receipt requested (so you can show that they received the request) (or Fedex or any other service where yu can get a copy of the delivery notification)
Step2: Contact the IRS after February 15 of the current year to report the problem with your 1099. You can contact the IRS toll-free at 1-800-829-1040. Tell thewm that you want to file a 1099 complaint. That your employer will not rectify an error
(Have your employer's name, complete address, employer identification number and telephone number and your own information, including Social Security number, on hand for the phone call)
Step 3: When you do this, IRS will sent a letter to the employer requesting that they submit a corrected form to you within 10 days. You will be sent a letter with a Form 4852 and instructions for filling it out.
Step 4: If your employer doesn't send you a corrected form you'll be able to use the Form 4852 instead
Hang on, looks like that link didn't work just a moment
given the information i have given you.do you feel certian he should not be responisble for any taxes at this time . if im not mistaken the only taxes owed will be if he cashes out the policy correct?
That is correct .... He IS NOT responsible for anything until he withdraws money from the contract (the policy) ... and he may be able to borrow against the contract as well.... It will only be if the policy lapses before his death that any taxes will be owed ... as long as the policy does not lapse, there will be no tax liability
i thank you very much for your help. my father as well. he will sleep well tonight thanks again
You are very welcome
If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.
HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question
do i have to save and exit or can i do that after rating i do not want to lose the steps you put together?
It wll all stay... once you rate the questions will always be here for you... Also, you can just bookmark this url, and as another option here's the url, to copy and paste into a document:http://www.justanswer.com/tax/7whp9-writting-behalf-father-trying-help-him-his-prior.html
one more thing that may help ... I'll move us to "Q&A" mode, you can see the whole thing better that way I'm told.
DO let me know if you have other questions thought ... here we go: