Disability on w2

[Possi]

My client recieved a W2 for disability that should not be taxable. She paid for the insurance. I have no idea why they issued a W2 for her.

The total is in boxes 1, 3 and 5. Zeros in other boxes. There is a J in box 12, but no number.

I KNOW it shouldn't be taxable. Should I back it out on Line 21? I don't see an example of this in TTB.

[Roland Slugg]

Not all disability benefits are excludable from income. Benefits paid with pre-tax dollars are taxable, and so are benefits paid by the employer. An insurance company would not issue a W-2, so the benefits in your client's case must have been paid by his employer. They are, in essence, a wage continuation plan and are taxable. See Code §104(a)(3).

[Possi]

Paid out of pocket

There is no adjustment for payments on her W2. It was not paid in pre tax dollars. When she was out with cancer, the premiums were billed to her and were paid straight from her checking account.

I swear I do not believe it is taxable.

[Roberts]

If it's paid post tax, it's not a taxed benefit.
Who issued the W-2?

[ChEAr$]

My client recieved a W2 for disability that should not be taxable. She paid for the insurance. I have no idea why they issued a W2 for her.

The total is in boxes 1, 3 and 5. Zeros in other boxes. There is a J in box 12, but no number.

I KNOW it shouldn't be taxable. Should I back it out on Line 21? I don't see an example of this in TTB.

You've answered your own question when you mention the "J" coded in box 12. Your software should hand it with no problem.

Try it, you'll like it.

[Burke]

Insurance providers can issue W-2's for disability benefits. It should be coded as 3rd party sick pay in Box 13 and the entire amount should be in 12a under Code J. Boxes 1,3,5 are blank.

[Possi]

it's messed up

That's what I'm sayin'....
It should be that way, but the W2 even LOOKS messed up. There's a letter J in box 12a, but no dollar amount, AND NO boxes are checked.

If I didn't know these people personally, I would have assumed it was taxable, but I know it isn't.

You think I can back it out on L21?

[Possi]

Nope!

It does not take care of it... that's why I'm at "answer central".... my own personal whining wall....

[David1980]

I think the best solution is a corrected W-2 if it's non-taxable. A little more work for them right now, but potentially saves an IRS letter/more work later. Is the issuer willing to correct it?

[Possi]

Calling them out

We are going to call them out on this and see if they will change the W2. thanks for all your input!

love my peeps.....

[taxea]

That's what I'm sayin'....
It should be that way, but the W2 even LOOKS messed up. There's a letter J in box 12a, but no dollar amount, AND NO boxes are checked.

If I didn't know these people personally, I would have assumed it was taxable, but I know it isn't.

You think I can back it out on L21?

This sounds like the portion of LTD for which premiums were paid by the employer. The portion paid by the client is not taxable. Who issued the W-2 and did the client get any documents at the time she left work that would explain this. When did she apply for the insurance and did she apply directly or through her employer?

Possi...it sounds to me like the client did not give you the full information. She probably just doesn't understand the entire issue. Start with a POA from her so you can talk with the issuer directly.

[Possi]

Aetna

Aetna issued the w2.

She has been in and out of work, has multiple cancers. They pay for this insurance. It comes out of her paycheck. No adjustments on her W2 reflect insurance, and when she is not working, they are billed directly for the insurance. So, it comes out of her paycheck or out of her pocket. There is no doubt that she pays for this insurance. Her husband will call Aetna and I'll talk to them Monday. The W2 appears to be incomplete with that "J" in box 12 and nothing else.

[BP.]

It comes out of her paycheck.

OK, since you now mention that it has been a payroll deduction during those times when she is receiving payroll, you might try one more thing to verify. Have a look at a paystub where the payroll deduction for this insurance was made. Determine if pretax or after tax. If pretax, the benefits are taxable.

An insurance company would not issue a W-2

They do.

[Possi]

Pretax

If it came out in pretax, that pay would still be subj to FICA, so there would have to be an adj on the W2, which there is not. I will see if they have a paystub anyway, or call her work. HR would know. thanks~

[BP.]

that pay would still be subj to FICA, so there would have to be an adj on the W2

Sec 125 cafeteria benefits are not subject to FICA. Would not look to the W2 for the answer. I think the key is the paystub.