When a non dependent gets health insurance from either a parent (in Ma children can get two years of coverage after dependency ends up to age 26) of a domestic partner the employer is required to impute income by IRS. I have read where this amount is based on FMV of the insurance. I would argue that if you have a family with two parents, a dependent child and a non dependent child that the insurance costs the same for a family of three or four. So to me, the family is getting something that costs neither the employer, nor the family anything so what it there to impute? I could see if a single parent included a non dependent child that there would be a cost to the company for going from a singel policy to a family policy. Any thoughts?
-
-
I don't have a definitive answer
That would certainly seem fair. If it doesn't cost any more there shouldn't be anything to include in the W-2. In the case of domestic partners how do they come up with the figure. Wouldn't it be the different of the single policy and the combined policy?
In Pub 15 it does talk about the FMV of fringe benefits. But it lists them on page 12, things like vacations, tickets, and so on which are different types of fringe benefits. Then it says how to calculate FMV (minus what the employee paid and " any amount the law excludes"). Wouldn't the law exclude the cost for the family policy anyway?JG -
No exclusion
If the partner does not qualify as a dependent there is no exclusion.Comment
-
What I think I will argue
If there is no additional cost to the employer by adding the non dependent child to the policy I think I will argue it is a diminiis frindge which is one of the exceptions to reporting FMV.Comment
-
I disagree
Pub 15-B says:
Section 3 says:Including taxable benefits in pay. You must include in a
recipient’s pay the amount by which the value of a fringe benefit is more than the sum of the following amounts.
• Any amount the law excludes from pay.
• Any amount the recipient paid for the benefit.
The rules used to determine the value of a fringe benefit
are discussed in section 3.
Thus, it is irrelevant that the employer incurs no additional cost to provide the benefit. If it does not qualify to be excluded under any of the tax free fringe benefit rules, the FMV must be added to the W-2 without any regard to what the employer had to pay.Fair market value. The fair market value (FMV) of a fringe
benefit is the amount an employee would have to pay a
third party in an arm’s-length transaction to buy or lease
the benefit. Determine this amount on the basis of all the
facts and circumstances.
Neither the amount the employee considers to be the
value of the fringe benefit nor the cost you incur to provide
the benefit determines its FMV.Comment
-
Under No-Additional-Cost Services [IRC §132(b)], page SB7-5 in TTB, it says:
So unless the employer is in the business of offering health insurance to customers, you can't use Section 132(b) to argue that the health insurance benefit was a no-additional-cost benefit, thus excludable.The value of services provided to employees that an employer offers to customers in the ordinary course of business in which the employee performs substantial services is excluded from taxable wages.Comment
-
Under De Minimis Fringe, page SB7-5 in TTB, it says:
Examples given under what is of little value and unreasonable or administratively impractical to account for are in my opinion no where close to the cost of health insurance. Occasional use of a copy machine cannot compare to the value of being provided health insurance.De Minimis Fringe Benefits [IRC §132(e)]
The value of de minimis benefits provided to employees are excluded
from taxable wages. A de minimis benefit is any property
or service provided that has so little value that accounting
for it would be unreasonable or administratively impractical. For
this purpose, the frequency of providing similar benefits to employees
is taken into account.
One example is group life insurance where the face amount is not more than $2,000. That should give you an idea of how small the benefit really is under this exclusion, as life insurance at $2,000 or less face value is often given away for free just by having a checking account at some bank. Nobody gives away similar health insurance for free for opening a bank account or investment account.Comment
-
How do we answer Kram's question?
So how do they add an amount for the Health Insurance for a domestic partner? Do they take the FMV of what it would cost one person to buy the policy or do they take the difference of what the policy would cost the employee and what it costs with the employee and the partner in a family plan?
I'm wondering it their is some kind of formula out there to figure this out. There must be payroll people out there that do this sort of thing. The HI I have are all just for the employees.
Pub 15 pg 12.So using FMV would the amount paid for both the dependent child and the non dependent child be taxable because it would cost that much if there were only one anyway?In general, the amount that you must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount that the law excludes.
I am stuck on the paragraph above that says you can subtract the amount the law excludes. The law excludes the amount for the employee and the dependent.Last edited by JG EA; 12-24-2008, 06:42 PM.JGComment
-
The amount excluded for the employee and dependent are irrelevant, since we are only talking about the non-dependent.Originally posted by JG EA View Post
You calculate the benefit as follows:
1. What is the FMV of the benefit received by the non-dependent? Lets say it is $1,000 (what the employer actually paid for the benefit is irrelevant, according to the Pub).
2. How much did the non-dependent pay for the benefit? Zero.
3. How much of the benefit provided to the non-dependent is excludable from income? Zero
Answer: $1,000 minus zero minus zero = $1,000.Comment
Comment