Insurance requests for tax returns always brings up the question, “Do I have to give them my tax return?” The answer depends on the circumstances, and is a conflict for the insured with a 50% win potential.
Very few Plans and policies actually require the submission of tax returns upon request. I seen some very old disability IDI policies that actually write provisions requiring tax returns. However, instead this is an issue that can be decided by common sense.
Insureds and claimants who are working part-time should agree to submit their tax returns upon request so that the insurer can “true-up” earnings and benefits paid. Some insureds are concerned about joint returns listing spousal income and social security numbers of dependents. This information can be redacted from the return as long as the W-2 or 1099 of your spouse is submitted showing income. You wouldn’t want your spouse’s income showing up in the calculation of your earnings.
When an insured is not working, and the Plan or policy does NOT require the submission of tax returns, it is possible to object to the request. Some claims handlers will back down, others will not, and benefits can be suspended until you submit the return anyway.
New IDI applications always require the submission of tax returns to verify occupation and loss of income. I wouldn’t challenge these requests, especially if you intend to continue working part-time, or are self-employed.
Sometimes people want to challenge the submission of tax returns and consider them private. Well, if you’ve been watching what goes on in the world today, that may not be the case for everyone. Still, disability insurers can hold out and demand the submission of tax returns. This is a conflict insureds often do not win.
In any event, this is the season when insurers begin asking for tax returns because extensions ended in October. If you have a strong objection to submitting tax returns, AND there is no requirement to do so in your policy, you can document your protest for the file. My experience with this issue, however, is that insureds are more than happy to submit their tax returns when insurers put a stop to benefits.
