1099 and future chargebacks

[PhxSunsFan]

Hypothetical..
Lets say Aetna sends you a 1099 for 2022 for 32,000. final expense.. . And during 2023.. for some reason.. all of this income is charged back and needs to be repaid etc.. How is this handled on 2023 tax returns.. does aetna ever adjust a 1099 if they claw back the money that has been repaid to them in 2023?? what do you do?

 

[Allen Trent]

Hypothetical..
Lets say Aetna sends you a 1099 for 2022 for 32,000. final expense.. . And during 2023.. for some reason.. all of this income is charged back and needs to be repaid etc.. How is this handled on 2023 tax returns.. does aetna ever adjust a 1099 if they claw back the money that has been repaid to them in 2023?? what do you do?

in normal examples where you have continued production of new and/or renewal commissions with a carrier, it will offset on the next 1099 received.

on a situation where you write a check to pay back the commissions, you would deduct that as a business expense in the year you paid the chargeback & legaly you would have to issue a 1099 to the carrier if it exceeds a net $600

Happens on a daily basis with PC agents as policy changes adding or reducing coverages is a daily accounting adjustment that nets out in the end from all the credits/debits

Really no different than a builder that takes a $50,000 down payment at time a project starts & has to refund all or a portion of the funds if something ends the project before money is earned. Builder had to count the receipted money when received & later deducts when refunded back, even if that crosses in tax years.

 

[goillini52]

Hypothetical..
Lets say Aetna sends you a 1099 for 2022 for 32,000. final expense.. . And during 2023.. for some reason.. all of this income is charged back and needs to be repaid etc.. How is this handled on 2023 tax returns.. does aetna ever adjust a 1099 if they claw back the money that has been repaid to them in 2023?? what do you do?

Wowie, you sure had a lot of charge backs.

 

[Allen Trent]

Wowie, you sure had a lot of charge backs.

in his defense. it could have been 1 big one.

Saw an agent get a $50,000 chargeback on 1 single policy about 10 years ago. Massive estate planning policy. Client died in 1st year & lots of non-disclosed conditions & hospitalizations caused policy to be rescinded, all premiums refunded to estate of the policy owner. with that refund to policy owner also came a commission backout

 

[Cornelius]

No wonder agents aren't fully explained the potential of chargebacks. One agent whose name I can't remember told me about how she hired a agent to her team and ended up with $100,000 to repay. She worked it out down. IUL's..

 

[DonP]

It goes on line 2 “ returns and allowances “ of sch c . Done several over the years were I write a 1-2 off policys and nothing else and had small chargebacks . Write a check for the chargeback amount and put it on line 2

 

[goillini52]

in his defense. it could have been 1 big one.

Saw an agent get a $50,000 chargeback on 1 single policy about 10 years ago. Massive estate planning policy. Client died in 1st year & lots of non-disclosed conditions & hospitalizations caused policy to be rescinded, all premiums refunded to estate of the policy owner. with that refund to policy owner also came a commission backout

Yeah, but he's talking FE. Not going to have a $50,000 commission on 1 FE policy.

 

[Allen Trent]

Yeah, but he's talking FE. Not going to have a $50,000 commission on 1 FE policy.

It was all hypothetical, so I assumed Aetna is coming out with a $1M face final expense later this year & the person was 127 year old smoker

 

[goillini52]

It was all hypothetical, so I assumed Aetna is coming out with a $1M face final expense later this year & the person was 127 year old smoker

He said it was hypothetical....that's about like, "asking for a friend".

 

[PhxSunsFan]

true.. its not hypo.. and i'm out of the fe business.. i think most comm was charged back. sad