Spouse and Dependent Life Ins

Hunter1

Does employee paid (after tax) spouse and dependent life insurance through the employer result in imputed income to the employee like life insurance for the employee over $50,000?

NaeNae55

If the employee is paying for the benefit, how can there be imputed income? What if they bought life insurance on their own? The over $50,000 life insurance benefit only has imputed income if the employer pays for it.

Good luck!

Pearce

Employee paid after tax dependent group term life insurance is excludable from income. See IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits.

Hunter1

Thanks for the replies thus far. I believe that employee paid life insurance over $50,000 can result in imputed income based on the IRS table of value of the insurance. If the employee has to pay less than the IRS says the insurance is worth, the difference is imputed income, right? I'll check the publication.

Don D

How might one determine what insurance is worth? A 50,000 dollar policy that is never used, is valueless. One that pays out is worth 50,000 dollars. Hunter, take some of us to the cabin one weekend and we'll work on this.

Hunter1

As I've said before, Forumites have an open invitation. Just let me know you're coming.

Here's the wording from Publication 15-B: "You must include in your employee's wages subject to social security and Medicare taxes the cost of group-term life insurance that is more than the cost of $50,000 of coverage, reduced by the amount the employee paid toward the insurance. Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2."
"Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of insurance coverage over $50,000 by the cost shown in the following table."

Also: "You can exclude the value of a de minimus benefit you provide to an employee from the employee's wages. ..... Examples of de minimus benefits include the following:

Occasional personal use of a company copy machine, if you sufficiently control its use so that at least 85% of its use is for business purposes (I include this one just to show how picky this can get - Are you sure that your copy machine is used 85% of the time for business use???)

Group-term life insurance payable on the death of an employee's spouse or dependent is a de minimus benefit if the face amount is not more than $2,000."

I know this is a pretty technical question, but: Our employees can opt for up to $10,000 on dependents, $20,000 on spouse. They pay the cost, but it's cheap. Imputed income or not?

Pearce

Page 11 of the Publication reads:

"Coverage for dependents. Group term life insurance coverage paid by the employer for the spouse and dependents of an employee may be excludable from income as a de minimis fringe benefit (see page 6). The part of the coverage that the employee paid on an after-tax basis is also excludable from income. For this purpose, the cost is figured using the montly cost table above."