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Why does the disability insurance company request my tax returns?



Disability attorney Stephen Jessup discusses why a disability insurance company will request a claimants tax returns.

The insurance companies are going to ask for your tax returns for a handful of reasons. First and foremost, it’s just to make sure you’re not working if you’re telling them that you are not working. Secondly, they may ask for them and if you have a residual disability claim, that’s going to be a basis to determine what your previous ability income was and when it comes into determining what your benefit amount is going to be under that residual disability definition.

Also, they may look on your tax returns and see that you have involvement in other corporations, so they may want to investigate that to really determine what your pre-disability occupation was. Some policy provisions will have it that they will consider every job you’re doing. So the tax returns are a way for the insurance companies to fully investigate so they have an idea in their mind of what your job duties were, or in the event of an ERISA group claim, it may be something that you may be able to do for any occupation definition. So there are various different reasons for it, but it’s not uncommon that they ask you for your tax returns.

There are 67 opinions so far. Add your comment now.

Claimant 646:

How many years do you have to give them? If you are collecting SS and you have given them the right to your file, wouldn’t that state whether you have been working using your Social Security number? Do I have to send complete taxes with all schedules and attachments? Finally, do I have the right to ask for my complete file with all notes from my LTD Insurance company, prior to submitting this information? I have never been asked for such information before, they have always accepted what I have sent them without challenges. It is Unum.

Attorney Greg Dell:

Claimant 646,

Your Unum disability policy probably gives them the right to request your tax returns. Unum is requesting this information so that they can verify that you have not earned any money from working. You can cross out any information that is not related to you. Unless your claim is denied, Unum will probably not provide a copy of your claim file. It is not unusual for Unum to request your tax returns.

Claimant 646:

Mr. Dell thank you for your assistance. How many years of taxes can they ask for? I have been on LTD for 10 years and they are asking for all 10 years. I have signed authorizations for them to obtain my SSD file (I receive monthly benefits), wouldn’t that have any income made stated? My husband has his own business and as a result of a search which UNUM did online, one of those company information selling has me down as Secretary/Treasurer. I got a letter from his accountant stating that I have never ever been an employee of the company to send to them. Do they have the right to request his company taxes for the past 10 years as well? I am completely stunned by these recent requests. Never have they challenged me before other than the normal 2-3 year papaerwork update.

Attorney Greg Dell:

Claimant 646,

They can ask for 10 years, but it does not mean that they can request an overpayment that goes back more than 5-6 years. If you don’t have the documents then just send what you have.

Elaine:

I currently have a LTD claim with UNUM. They recently scheduled a field interview of which I refused unless they could provide my a copy of my contract showing that I was obligated to do a field visit. They did not provide that. They then wanted to do a telephone interview, and I refused that as well. Now, they are requesting tax returns and a copy of my SS file along with a blanket consent for them to check all records.

I have repeatedly asked both my former employer and UNUM for a copy of my contract and policy, and to this date I have received nothing. The last letter said that I could be cancelled for non-compliance if I failed to send tax returns within 30 days. That time frame ends next week. However, I feel that it is my right to be provided with a copy of my policy so that I know what my duties are as the insured. I have extensive medical records that should prove my ongoing illness, yet they have not asked for updated medical records from my doctor. I have no problem sending W-2 records of which I only have UNUM and SS, but I don’t feel my husband’s income is of their concern. What should I do? Is there a penalty that UNUM could be hit with for not providing a copy of my policy?

Attorney Stephen Jessup:

Elaine,

Under ERISA, it is your former employer’s duty to provide you with a copy of your policy upon written request. I would suggest that you put your request in writing and advise them that it is being made pursuant to Section 1332 of ERISA. Please note that failure to cooperate with requests for information could result in the rendering of an adverse determination on your claim.

Cynthia:

If I haven’t filed my tax returns and did work the last 2 years, can they deny me? I provided a letter from my accountant as well as a 4506. Also the rep asked if I made over 40K each year? Why is that? in 2011 I did not, but in 2012 I did make over that. Can I be denied by not making the 40K? I asked for a copy asking where in my policy does it state over 40K as well as me providing the other paperwork. So far they have the info requested letter from accountant as well as the 4506. Is that enough? Can I be denied?

Thank You!
Cynthia

Attorney Stephen Jessup:

Cynthia,

Typically, in order to calculate your monthly benefit, the carrier would need financial documentation to verify earnings. It is not uncommon for them to request tax information. As I do not have a copy of your policy to determine what qualifiers there are to benefits, I cannot speak as to your inquiry regarding earning 40k.

Bob:

I am applying for disability insurance and the underwriters are asking for my last 2 years’ full tax returns. I have already provided a W2. Why do they need my tax return if I’ve already shown them my wages that I’m trying to protect?

In my opinion, if I have outside income – i.e. rental property or other passive income – it shouldn’t matter to them because I’m not asking for that to be covered by the policy. Am I wrong or crazy?

Attorney Greg Dell:

Bob,

It standard for the underwriters to ask for your tax returns. You may be eligible for more coverage than you think based upon some other income. There may also look at your other income to determine what occupation class you should be in. Are you applying for benefits or are you applying to get a policy. The issue with other income is much more complicated when it comes time to apply for benefits as they carrier will look at that income as method to say you have multiple occupations. At the end of the day, most disability carriers will require your tax returns.

Eric:

I have stocks that I have before my disability. If I sell off some of my shares to aid me, how does that impact my disability income?

Attorney Stephen Jessup:

Eric,

Stocks are passive forms of income not typically considered a source of other income that can reduce your benefit. That being said, I would suggest you review your policy to determine how the carrier will treat same.

Bob:

@Eric,

For what it’s worth, my carrier used my passive income (in my case, rental income) to reduce my benefit by the corresponding amount. Of course, that reduced my premium, but was still frustrating.

Dot:

What if I file my taxes with my wife and I am asked to show tax returns to my disability insurance company? How do I make my wife’s information private? Or do I not have a chance?

Attorney Stephen Jessup:

Dot,

If your disability insurance carrier is requesting your tax returns I recommend you omit your wife’s Social Security number, but it may be difficult to avoid providing her earnings. Regardless, the carrier should only be relying on the amounts attributable to you when determining eligibility for benefits.

John:

I have Occupational Insurance. Do they have a right for my SSDI file from SSA?

Attorney Stephen Jessup:

John,

If SSDI is an offset under your disability policy then they might have a right to obtain information as it relates to your SSA disability claim. I would suggest you review any authorizations you may have signed allowing release of information. That being said, it is not at all uncommon for a disability carrier to request information from the SSA.

Jack:

Hello,

I have been on LTD through Cigna since a July 2009 injury. They have done all of the normal items as far as investigators following us, IME visits and constant requests for medical evaluations and reports. Today we received a letter requesting tax returns for 2010, 2011, 2012 & 2013. This is a new one.

There are a couple of reason this causes concern.

#1 – My wife has a one person owned LLC that goes on our taxes as if it were personal income. It is not filed as business taxes and doesn’t specify that it is only earned by my wife.

#2 – In each of those years we exercised stock options with my previous employer and that employer held out taxes and sent us a 1099.

How do we handle the request and are these two items going to be an issue?

Thanks,
J

Attorney Stephen Jessup:

Jack,

Without seeing the information and policy we would not be able to advise you of any liabilities you may have under the policy. Please feel free to contact our office to discuss same in further detail.

Kathy K.:

My husband had applied for disability through SSA and was denied. He then appealed. Now the SSA is asking him for his W2’s and tax returns. We are legally married but not legally separated so we file together. Is this a normal process in the appeals process. We are questioning as to why they want this information?

We are not together as a couple but have not gotten a divorce yet either. He hasn’t worked in over a year and a half.

Thank you!

Attorney Stephen Jessup:

Kathy,

Unfortunately, as our focus is on private disability insurance policies, you will need to consult with an attorney that handles SSDI claims as to your questions.

Jim Kanderly:

I have been receiving LTD from Guardian since 2006, offset by my SSDI amounts, and I have coined with every request for APS and all other documentation. Last year they advised me that I would only be reevaluated once a year in October. I gave them the data this past October, and now they called I say they are sending me a functional capacity form, a request for doctor’s visit notes, my 2013 tax return, educational and work experience form, and a continuing LTD form. Why the change? Are they looking for a reason to kick me off disability? I have not worked a day since separating from my employer and my condition gets worse every year. I have both physical disabilities and psychiatric diagnoses. Why would there be a sudden flurry of activity? I haven’t done anything wrong, but they make a person feel like a criminal with all this snooping and telling me one thing and then doing another. Thanks for your feedback in advance!

Attorney Stephen Jessup:

Jim,

Have you recently been assigned to a new claim manager? If so, it would not be uncommon for them to seek updated information ahead of schedule. With respect to what has changed, one can I only guess as to the increased interest. Please feel free to contact our office to discuss your claim in greater detail so we can better advise you.

Margo:

I am on Unum Long Term Disability. Do I have to report my tax refund as income to Unum?

Attorney Stephen Jessup:

Margo,

I have never seen a tax refund be considered income, so you should not have anything to worry about.

Jose G.:

I have a long term disability claim with an insurance company. They recently did a field interview and now they are requesting my taxes. My brother is using my name for a couple of business he has due to his bad credit. I file the business tax returns under my name b/c the businesses are under my name, however there is no business income due to losses. I didnt let insurance company know about this. Do I need to worry about anything since there was no actual income and the businesses had losses?

Attorney Stephen Jessup:

Jose,

Yes- you very much need to worry as your carrier is more than likely investigating your claim as it thinks you are working. Please feel free to contact our office to discuss your situation in detail.

Johnnie O.:

My mother just passed May 4th we buried her May 9. I took over payments of the insurance policies she was paying on and changed over to my name as one making payments. There’s about 10 different people policies (my brothers and sister, my kids). Many of these policies are already paid for.I receive SSI , I haven’t worked in years. I only got myself a extra policies because my old one is only for 3000 . So why all the sudden now I’m being asked for a W-9 form? What’s would/could the reason be for me to need fill out a W-9?.

Attorney Stephen Jessup:

Johnnie,

I do not understand the nature of the policies you are inquiring about. If any income is being derived from the policy and it is taxable then they request a W-9. Please feel free to contact our office to discuss your situation in greater detail.

David:

If I am married and file taxes separately, can UNUM ask for and would I have to provide them my spouse’s Tax Returns?

Attorney Stephen Jessup:

David,

I don’t see how they would be entitled to your wife’s taxes as they have nothing to do with you and your income.

Tara:

Hello. I have been on claim for 20 years under an ‘own occupation’ policy and have never worked since my disability started. I do have passive income including dividends and rental income. My erisa insurer asking for tax returns for 10 years. There is nothing in the policy regarding this–just a clause saying my payments will end on the date I fail to report my’ general income sources’ like ss benefits [i have none].

I do not have copies of the requested tax returns. This seems to me to be overreaching and abusive claims management by the insurance company. I would really appreciate your perspective.

Thank you and happy holidays !!!

Peter:

I have been on LTD for 5 years. I started an LLC a couple of years ago which required significant start up costs and ongoing expenses that impact revenue. The business does not at present make a profit. I elected to pay my wife a salary that was over the salary of what she would have expected in her profession due to the 24/7/365 day need for her to be available and unsocial working hours. As the LLC has revenue and significant expenses how will the private disability company view the fact that I pay my wife and not myself? How do they determine what are reasonable business expenses and what are not? Is the offset negotiable in cases like these?
I am planning on paying myself next year and will declare with the company so they can offset my LTD claim.

Attorney Stephen Jessup:

Tara,

The carrier most certainly thinks you have some source of other income that might be an offset under the policy (passive income is not). I would request in writing an explanation as to why they want the information. The will respond in writing, which will confirm what they are up to.

Attorney Stephen Jessup:

Peter,

Unfortunately, your fact pattern is too complicated to allow for any meaningful response. Please feel free to contact our office to discuss your situation and what may happen with respect to your claim in light of your policy language.

Dennis A.:

I receive LTD from UNUM since 2010, and also SSDI. I have a Hobby shop that I repair, clean and work on saddlery & tack. This a hobby for me since I was in my youth. I have a new case manager assigned and she asked me what I do and I told her of this. Their is little or no income received from my hobbies as I explained. The new case manager has requested my Tax information from all years since I began receiving LTD. I’ve read through the threads and understand the right to request, and what I should do to omit my spouses information.
What if anything, are there clauses that I can go back and collect extra monies from my insurance company and employer for my demise that caused me to be placed under LTD?
I’ve been seen by all of my Dr’s on a semi-annual basis and they still concur that due to my physical and mental suffering brought on by hours worked, traveling, work related stress and hostile,work environment I should be entitled to more. Is there such a potential to do so even after 5 years has passed?

Tara:

Thank you, Attorney Jessup. I have sent two certified letters asking them why they wanted the information and they refuse to answer. I have also asked both my ex- employer plus the plan administrator by certified letter for my full Plan/ Policy to see what language is in there regarding tax returns, but none has been provided for over three months .
Can they legally refuse to clarify policy provisions and stonewall me as my fiduciary ? Regardless, I recently sent them 3 years worth of tax returns which is all I could find . My monthly check did not arrive yet so we will see……..

Thank you.

Attorney Stephen Jessup:

Dennis, with respect to your wife’s information the only realistic thing you may be able to do is white out her SSDI. Only your W-2 would be needed. Unum is looking to determine if (1) you potentially owe them any money back based on your earnings and (2) will likely review your claim for continued benefits. With respect to any actions you have against your employer you will need to consult with an employment attorney to determine if you have any legal rights.

Attorney Stephen Jessup:

Tara, there typically aren’t situations where a carrier will not clarify a plan provision; however, not being responsive as to the exact nature of a request for information is another story, but generally you can get a general idea. I would also suggest one more certified letter to your former employer requesting a complete copy of the plan document- advise them that the request is being made pursuant to Section 1332 of ERISA and that failure to provide same could result in civil penalty.

Richard:

Hello,
I would like to ask if there is a statue of limitation for LTD Insurance Co. to go after your SSI/WC settlement.
I was awarded the max 24 mo. disability for Mental illness. I was told by a person that LTD can only collect for the year I was paid, so if I get paid for 2016 and my SSI/WC claim is settled in 2017 can LTD still collect for 2016 wadges paid from my 2017 settlement? Thanks, Richard

Attorney Stephen Jessup:

Richard, your carrier could have a right to seek repayment. How long ago did your claim with the carrier end? Are you represented by your own attorney for SSDI?

Richard:

Attorney Jessup,
Thank you for the quick response! My LTD claim will end Feb. 2017. Yes, I am represented by a SSDI Attorney and WC Attorney. I asked my SSDI attorney and she didn’t have an answer to my question. Do I need to seek a LTD Attorney or some other Attorney to get an answer to my question? Thanks, Richard

Attorney Stephen Jessup:

Richard, any disability insurance attorney would tell you that the carrier would have a right to seek repayment of any benefits paid for SSDI that overlap with a period of time that the carrier was/is paying you. Whether the carrier finds out if you received the benefits after your claim comes to an end is another matter.

Ryan:

Hello. I receive ssdi and ltd via Guardian through age 67 (started 13 years ago). I have Aids and many complications (neuropathy,kidney issues, brain fog, autonomic nerve disease,etc). For the first time in 13 years, Guardian asked for a copy of my tax return. They couldn’t say why. I sent returns and am being told claim is good through end of year. Recently I passed out and was transported to ER and admitted for 4 days. Why do they now need to see my return? They withhold taxes, and deduct my ssdi. Concerned. I don’t work. Please help? Afraid they are trying to deny my claim.

Attorney Stephen Jessup:

Ryan, request for tax records may just be Guardian confirming you have no other sources of income that would be deductible under the policy.

Ann:

Hi I had taken money out of my iRA and didn’t know if ERISA considers this as income. And half the money was my money that I put in the IRA. I didn’t report this since I filled out my LTD form before doing my taxes for that year. Will there be a penality for not reporting this if it’s income? I would plan to repay or would they adjust my payments? Thank you

Attorney Stephen Jessup:

Ann, you will need to review your policy to determine what the carrier deems to be a source of other income subject to offset. If the money in the IRA stems from benefits originating in your employer’s retirement plan it could be an offset that would prompt an overpayment from the carrier.

Kae:

I have aetna LTD disability and they requested the last two years of my income taxes under suspicion I’m operating a business at home. For 2014 my now ex husbands taxes are included filed jointly. For 2015 my tax consultant wanted me to claim the sales of farm animals I sold off because I was no longer able to take care of them after my divorce. Are they going to use this tax information against me to say I’ve been working? The taxes show a several thousand dollar loss in profit and I never actually sold any animal or chicken eggs for cash but traded them for hay and help cleaning my house.

Attorney Stephen Jessup:

Kae, it will certainly lead them to make an inquiry, but if you were not working in furtherance of a business then the likelihood it will be a large problem seems relatively low. Please feel free to contact our office to discuss your claim and review the correspondence/Policy from Aetna.

Tim:

I receive disability from both SS and MetLife. I receive disability due to a stage 4 diagnosis 9 years ago and the post cancer problems I’m experiencing. I have continually given medical reports but just recently MetLife is asking for my tax returns. I have not worked in any capacity since my cancer diagnosis. However, over the years I have pulled from my retirement plans showing 1099’s. Is there a possibility they will consider this as income to cancel my disability? It has been the only way to help pay bills and I bought a home with a lot of it. It was that or pay high rent. Thought that would be a good thing. My only concern is the 1099’s from those retirement plans. I have not received any from any types of work. I would appreciate any advice on how I should approach this with them. Currently I am having kidney problems and trying to avoid a transplant or dialysis. My doctor mentioned that it would be foolish for them to cancel on me if I have to end up having to go that route. I’m only 48 and this is so difficult for me.

Attorney Stephen Jessup:

Tim, if your plan is an employer provided policy, depending on the policy language, the retirement proceeds could be a source of Other Income subject to offsetting your benefit, and potentially resulting in an overpayment. If the retirement benefits are from the employer you received the disability policy from, then it likely is an offset. A possibility to consider is a potential buyout from MetLife- but they will still review for any potential overpayment. Please feel free to contact our office to discuss your claim further.

Steve:

Hello,
I own my own business and I’m currently collecting disability from a private insurance company. I’m thinking of selling my business and I want to know if I do sell am I still eligible to collect my benefits? My doctor has told me I can not work for at least a year. Thank you!

Attorney Stephen Jessup:

Steve, without reviewing your policy we would not be able to determine how the sale of your practice could affect your claim. Please feel free to contact our office to discuss in further detail.

Ella H.:

Hello–I am going to refinance my home at a lower interest rate. I was going to get about 10000 extra out because I have two upcoming surgeries and would like to have money to pay towards them instead of going into debt. Will UNUM consider this extra 10000.00 as income and keep it? If they do, I won’t be able to meet my mortgage payments etc.

Thank you.

Attorney Stephen Jessup:

Ella, I have not seen a Unum policy that designates such money as a source of Other Income subject to offsetting your benefit.

Jenny W:

I am going on disability due to dementia. My physicians want me to build my memory pathways by learning new hobbies. If I sell these hobbies just to cover material costs will my disability benefits be taken away?

Larry:

I am receiving long term disability, I was working and providing private insurance company my pay stub which didn’t effect my monthly check. When I quit I informed them. I started back at same job, same pay but I didn’t inform insurance company, will this be fraud, will I loose my benefits, will I go to jail or pay them back. I screwed up.

Attorney Stephen Jessup:

Jenny, your benefits may not be taken away but it could be considered earned income and impact the amount of your benefits. Ultimately, it all depends on the language in your policy.

Attorney Stephen Jessup:

Larry, this likely isn’t a situation where there is any criminality rising to fraud, but the insurance carrier is likely due an overpayment based on your work earnings. More than likely if they find out they will be requesting money back if the earnings are such that it impacts your monthly benefit.

Juley:

Recently the Guardian asked for a copy of my tax return for 2015. I have received benefits fir 20 years now, and I am only 10 years away from reaching age 65. I only recall them asking for my tax return once before, probably 5 years ago or more. I don’t have anything to hide, other than the details of my husband’s income, employer’s deferred investments, and other sensitive financial data which has no relevance to my LTD. They are insisting they have to have all schedules … none of them relates to whether or not I have another source of income, which I don’t. I feel it’s an invasion of my husband’s privacy; I wouldn’t mind of I were single & the information only pertained to me. There is yet another new claims administrator, and I feel like he’s fishing fpr any reason to discontinue payments.

I vague;y recollect dealing with this issue by authorizing either the IRS or the State of CA to provide all copies of relevant 1099s & W-2s to show whether or not I had additional sources of income, but they are rejecting my suggestion this time around. I realize they probably have the technical right to require my tax return in order to continue payment of my claim, but what possible reason could they have to look at my schedules A & B, etc? My Joint Interest, Dividends, or Deductions really shouldn’t affect my eligibility.

I have considered redacting my tax returns so that the only information showing is relevant only to myself, other than showing which schedules and deductions are being taken (but not how much.) The last time I did this, they ended up telling me about the other option, which I mentioned above, where I authorized one of the Tax Authorities to provide only the relevant W-2’s and 1099’s pertaining to myself, of which there were none except SSDI & LTD.

Am I being unreasonable? If I were running my own business, by some miracle, what would they be looking for on my return? I have never had a business, so I don’t know what forms would be relevant.

Attorney Stephen Jessup:

Juley, it would be strange that they are requesting everything now. Typically insurance carriers will only request tax returns if they have reason to believe that an insured is working. Guardian is a historically reasonable insurance company, I would suggest you contact the in writing in inquire why they are requesting the returns.

Teresa W.:

For the last 6 months and the coming months I have been pulling funds from my 401 k. Will this offset my insurance payments?

Attorney Stephen Jessup:

Teresa, many policies exclude 401(k) plans from the list of sources of “Other Income.” However, you would need to review your policy to confirm.

William:

I’ve applied for LTD many months ago and keep getting a request for a Profit Loss report on the first two months of my claim. I became diagnosed with a serious illness and I own my own business. When I was diagnosed, I cut my hours in half and continued to work these first two months until I was unable to work at all on the third month due to treatment. Why would they keep asking for a Profit Loss report for these first two months in order to approve my claim? I’ve sent them business income reports, and tax returns yet the want to know my losses in a P/L report.

Attorney Stephen Jessup:

William, if your policy has a residual disability rider, which I assume it does, the Profit and Loss statements are to document the monthly loss of income to compute what percentage of the benefit would be payable under the residual disability rider. Please feel free to contact our office to discuss your claim in greater detail.

Beth:

My disability insurance is requesting my taxes for 2015-2016 which I have not filed. There is no provision in the policy which requires me to provide this information. Is my right to privacy protected by the constitution??

Attorney Stephen Jessup:

Beth, although the policy may not explicitly state they can request your tax returns, an insurance company will often request to verify earnings (if the benefit is being paid under a residual disability provision) or to verify that you are not working for profit (which would be a potential offset source).

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