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Imputed income from domestic partner insurance premium

On Lawyer & Legal » Tax Law

5,276 words with 6 Comments; publish: Wed, 16 Mar 2005 16:20:00 GMT; (80093.75, « »)

The state is: MN

I would like to enroll my domestic partner on my group health insurance, which would switch my current coverage to Employee/Children to Family. However, our handbook states that the portion of the employer-paid premium is considered taxable (or imputed) income and FICA and income taxes will be calculated and withheld from my paycheck.

When I called my HR dept directly, the customer service person didn't mention any tax implications (it was 1 paragraph, buried in the handbook), just kept stating the withholding will be X dollars per pay period (the diff between Emp/Ch and Family cov). Which is true, in a sense. I heard, from other employees, that the tax implications can have a huge affect on your take-home pay, up to $100 per paycheck. No one could tell me how much will be added to my gross pay (what the amount of the employer paid prem will be!)

My question is this: Is the imputed income taxed at a higher rate then actual wages? Would this be added to my W-2 as income or will I get 1099'd at the end of the year? Why would my employer complicate payroll withholdings by doing this?

Thanks for any thoughts

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  • 6 Comments
    • Thanks for the link snipes. I am still waiting for a 'supervisor' to call back and quote the amout that would be imputed. Another Customer Service Rep stated the amount would not be added to my W-2 and I wouldn't be 1099'd.

      I am just frustrated at the lack of detailed info available. I actually work for a major health insurance company so I can't believe that it is so hard to get a premium quote or at least provide class code information so I can estimate how this will affect my budget. It feels like they offer the benefit as a 'promotional' gesture, but make you jump through hoops to actually get results.

      #1; Sun, 20 Mar 2005 10:01:00 GMT
    • Quote:
      === Original Words ===

      What is the name of your state? MN

      I would like to enroll my domestic partner on my group health insurance, which would switch my current coverage to Employee/Children to Family. However, our handbook states that the portion of the employer-paid premium is considered taxable (or imputed) income and FICA and income taxes will be calculated and withheld from my paycheck.

      When I called my HR dept directly, the customer service person didn't mention any tax implications (it was 1 paragraph, buried in the handbook), just kept stating the withholding will be X dollars per pay period (the diff between Emp/Ch and Family cov). Which is true, in a sense. I heard, from other employees, that the tax implications can have a huge affect on your take-home pay, up to $100 per paycheck. No one could tell me how much will be added to my gross pay (what the amount of the employer paid prem will be!)

      My question is this: Is the imputed income taxed at a higher rate then actual wages? Would this be added to my W-2 as income or will I get 1099'd at the end of the year? Why would my employer complicate payroll withholdings by doing this?

      Thanks for any thoughts

      You really need to talk to your employer to pin it down more fully. However the tax implications, at maximum would be your marginal tax rate (the tax rate of your last dollars earned) times the amount that the employer would impute to you as additional wages.

      So, for example, if your last dollars earned are in the 28% tax bracket, and the employer imputes 100.00 a pay period in income to you, then the tax implication would be 28.00 per pay period for federal, 7.69 for SS and Medicare taxes and whatever applicable for your state.

      #2; Wed, 16 Mar 2005 18:37:00 GMT
    • This normally refers to life insurance premiums, not health insurance premiums.

      http://www.irs.gov/govt/fslg/article/ ,,id=11 345, .html

      Snipes

      #3; Wed, 16 Mar 2005 20:10:00 GMT
    • Read the link I posted. Taxable income is generated when the employer pays for LIFE insurance, not medical.

      Snipes

      #4; Wed, 16 Mar 2005 21:37:00 GMT
    • So if I earn 20,000.00 a year and the employer paid portion of the premiums are 300.00 per month what would show on my W-2? If I went to apply for a loan would I state I make 20,000.00 or 23600?

      I typically get back what I pay in so would I get a refund on the federal and state taxes? I am just having trouble wrapping my brain around this and getting annoyed with my employer that this isn't made clearer. I have a call in to a supervisor at HR, so far no one has been able to quote me a premium on a male, aged 58, so I can figure out what my bottom line will be!

      #5; Wed, 16 Mar 2005 20:18:00 GMT
    • Have you received a solid answer on the the "Imputed Income" issue? I work for a global corporation and I am having a great deal of difficulty receiving answers. I am going through the same situation. Matter of fact, I had to drop my domestic partner off of my insurance because the amount being deducted was rediculous every pay period. Had my domestic partner on my insurance for years and as of 1Jan05 it of course all changed and still, it is not clear to me. I gave my company 24 hours, today as of 10:00 am, to respond back to me. Seemed I was getting the run around about the imputed income. Just the last two pay periods, the FICA came into effect, no formal notice, no nothing. So any info you may have would be great. Thanks
      #6; Wed, 27 Apr 2005 12:54:00 GMT