Long-Term Disability on W-2

[tpnl]

My client received a W-2 with box 1 completed. Box 2 through 20 empty.
Client provided statements for each monthly payment she received and those payments added up to the amount in Box 1 of the W-2. The statements say the payments are for long-term disability.

My question is does my client need to pay SS and Medicare on these wages?

[travis bickle]

you answered your question

My client received a W-2 with box 1 completed. Box 2 through 20 empty.
Client provided statements for each monthly payment she received and those payments added up to the amount in Box 1 of the W-2. The statements say the payments are for long-term disability.

My question is does my client need to pay SS and Medicare on these wages?

Box 2 through 20 empty.

[Safire]

No and guess what. That income qualifies for earned income credit.

[Zee]

First six months are subject to FICA and Medicare

It's my understanding that the first six months of the disability payments are subject to FICA and Medicare taxation.

[travis bickle]

based on?

It's my understanding that the first six months of the disability payments are subject to FICA and Medicare taxation.

and, your source is . . .

[Zee]

and, your source is . . .

-Travis

I was offended by your earlier post, and equally offended by this one.

Did I miss your appointment as an editor of this Bulletin Board?

As you will note, I said "it's my understanding"...that means I could be wrong. When I saw the original post, I did a little online research (the same way you can) by googling, "is disability income subject to FICA and Medicare taxation". I found numerous writings that indicated the first six months is taxable, mostly from disability income providers. I also found one IRS proposed regulation, then decided not to spend any more time. That's why I posted, "it's my understanding, rather than being more definitive".

I don't expect poster's here to be required to support their thoughts with code references, obviously you do. So, let me ask...what is your code reference to suggest that disability income is not subject to FICA or Medicare because boxes are empty on on the W2?

Here is the only "official" reference I found in my brief internet search. It was a "proposed" reg, so of course I could be wrong.

http://www.mrsc.org/GovDocs/IRS-Proposed.pdf

[travis bickle]

sorry you took offense,

-Travis

I was offended by your earlier post, and equally offended by this one.

Did I miss your appointment as an editor of this Bulletin Board?

As you will note, I said "it's my understanding"...that means I could be wrong. When I saw the original post, I did a little online research (the same way you can) by googling, "is disability income subject to FICA and Medicare taxation". I found numerous writings that indicated the first six months is taxable, mostly from disability income providers. I also found one IRS proposed regulation, then decided not to spend any more time. That's why I posted, "it's my understanding, rather than being more definitive".

I don't expect poster's here to be required to support their thoughts with code references, obviously you do. So, let me ask...what is your code reference to suggest that disability income is not subject to FICA or Medicare because boxes are empty on on the W2?

Here is the only "official" reference I found in my brief internet search. It was a "proposed" reg, so of course I could be wrong.

http://www.mrsc.org/GovDocs/IRS-Proposed.pdf

we obviously have a different interpretation of what goes on on this board.

and, no, you are obviously quite correct, i am not an editor for this board.

the whole point of my earlier post [and i do realize we cannot read each other's minds] is this:

all too often on this board, everyone [that includes me] posts some item and it starts:
" ' i think . . . '
' i believe . . . '
' i feel . . .' "

and this is supposed to be a serious item listed by a serious tax PROFESSIONAL.

if i want "i think, i believe, i feel" i will go ask my car mechanic for tax advice and assistance.

why cannot we, as tax PROFESSIONALS, make it a personal goal that we only post items that we have done some research, instead of "i believe"?

since by your own admission you did do research, wouldn't it have been better to type "you know, i just did some research on this and here is what i found . . ."

and, if a client comes in with a valid, properly prepared w2 and boxes 2 through 20 are empty, then i ASSUME that it is non-taxable -- or, do you really second-guess the w2 preparer and make your client pay fica/medicare?

have a good life.

[Zee]

we obviously have a different interpretation of what goes on on this board.

and, no, you are obviously quite correct, i am not an editor for this board.

the whole point of my earlier post [and i do realize we cannot read each other's minds] is this:

all too often on this board, everyone [that includes me] posts some item and it starts:
" ' i think . . . '
' i believe . . . '
' i feel . . .' "

and this is supposed to be a serious item listed by a serious tax PROFESSIONAL.

if i want "i think, i believe, i feel" i will go ask my car mechanic for tax advice and assistance.

why cannot we, as tax PROFESSIONALS, make it a personal goal that we only post items that we have done some research, instead of "i believe"?

since by your own admission you did do research, wouldn't it have been better to type "you know, i just did some research on this and here is what i found . . ."

and, if a client comes in with a valid, properly prepared w2 and boxes 2 through 20 are empty, then i ASSUME that it is non-taxable -- or, do you really second-guess the w2 preparer and make your client pay fica/medicare?

have a good life.

Well Travis, you can't have it both ways. Your response to this question cited no authority, but you expect others to do so. Are you having a bad day, or something?

In answer to your question, no I would not assume that an amount is non-taxable because boxes are empty on a W2...I've seen far too many with errors. Obviously, the poster also thought it was worth double-checking.

If clients want code and reg sources, I charge for my time. If another poster "politely" asks, I probably would do the best I can (if I have the time). If you expect a code reference with each response here, you're going to be disappointed. It doesn't happen very often (again, where is yours?) In addition, suggesting that posts without references aren't helpful certainly doesn't encourage others to help by answering questions. Adding source references is very time-consuming. Sometimes I see sources citing the TaxBook...that's very helpful, but also probably doesn't meet your standards since the TaxBook is not an authoritative source.

Yes, we view the board very differently. I don't expect poster's to take the time to post code references and links each time they offer a response. "I think", "I believe", "I feel", or "It's my understanding" tells me the poster is offering his opinion without extensive research (or maybe none at all).

Actually, after attaching the proposed 2005 regulation and quicky rereading it, it suggests removing the six month FICA taxation. So, maybe the law was changed.

I didn't find anything else, so further research is necessary to answer this question definitively. That's up to the poster, but it's possible someone else more knowledgeable than I can provide the definitive answer.

[Bees Knees]

The definition of wages for purposes of FICA taxes is found at IRC Section 3121(a) which says:

For purposes of this chapter, the term ``wages'' means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include—

It then goes on to list wages that are not wages for purposes of FICA. Section 3121(a)(1) for example says the wages in excess of the Social Security wage base are not subject to Social Security tax, even though they are subject to the Medicare portion of FICA.

Section 3121(a)(4) answers your question:

(4) any payment on account of sickness or accident disability, or medical or hospitalization expenses in connection with sickness or accident disability, made by an employer to, or on behalf of, an employee after the expiration of 6 calendar months following the last calendar month in which the employee worked for such employer;

Good catch Zee.

[Zee]

The definition of wages for purposes of FICA taxes is found at IRC Section 3121(a) which says:



It then goes on to list wages that are not wages for purposes of FICA. Section 3121(a)(1) for example says the wages in excess of the Social Security wage base are not subject to Social Security tax, even though they are subject to the Medicare portion of FICA.

Section 3121(a)(4) answers your question:



Good catch Zee.

Bees-

Thanks for the citation. I couldn't find one.

I was extremely reluctant to post my first response after reading a post by Travis in another thread admonishing those posting without providing citations. That's the problem. It discourages communication from those with only limited research sources available trying to help as best they can. My research is pretty much limited to the internet and the TaxBook, and the internet is quite time-consuming.

[fliszt]

Zee, I too

was equally offended by Travis' remarks. This IS a professional board, but there is no reason persons can not be polite when responding to questions. And for my 2 cents if persons can not be polite and understanding, then I could care less how much he/she knows -- I would prefer them to not post. period.

[thomtax]

Zee, do you mean to say that I can't just throw out my problems and let you do my research while I go on with other work that will make me money? :-)

I personally appreciate someone taking time to post that says something to the effect -
I seem to remember, I think, I have always thought, etc. This then tells me that I am not completely by myself and will do further research. If no one else has ever heard of my viewpoint I may decide that I was off base and not waste a lot of time doing further looking.

LT

[JohnH]

I agree.
When I post something I'm grateful for any response (even if it's laughter, criticsm, or derision)

It's nice when someone has a cite handy & takes the time to post it. But I appreciate opinions, impressions, of off-the-cuff replies. Sometimes it's helpful just to get my head redirected in order to make it easy to actually do my own research.

[Zee]

I wish I always knew the answers and could easily provide cites

As Travis said, "if i want "i think, i believe, i feel" i will go ask my car mechanic for tax advice and assistance". I guess Travis hasn't been to a car repair shop recently. The last time I had an oil change, the rate for mechanical work was $100 hour.

[thomtax]

Asking for tax advice from a mechanic is fine, as long as you remember that he is thinking without benefit of any education in a subject.

If you want the ultimate in this, go to a doctor. His approach is usually "I THINK it might be this. We need to run some tests to find out. NOPE, it wasn't that. It could be this other thing, so we need to run some more tests." And we pay a lot of money for this advice and he has a lot of education. I would much rather have his thoughts than my barber's before having my operation. The doctor's is based on some experience, education or something, not the feeling at the moment.

LT