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Taxation - Employer pays premiums for individual life insurance

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gindie

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Sep 19, 2017, 12:38:45 AM9/19/17
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Situation:

For an employee benefit, a small business employer pays the premiums for (non-group) term life insurance policies obtained by the employees themselves. The face value of these policies is significantly above $50,000.

Questions:

1) Are these payments taxable to the employee?

2) If so, can the Uniform Premium Table be used to determine the taxable amount? (Remember, this is not group insurance)

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Alan

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Sep 19, 2017, 2:24:36 PM9/19/17
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On 9/18/17 9:35 PM, gindie wrote:
> Situation:
>
> For an employee benefit, a small business employer pays the premiums for (non-group) term life insurance policies obtained by the employees themselves. The face value of these policies is significantly above $50,000.
>
> Questions:
>
> 1) Are these payments taxable to the employee?
>
> 2) If so, can the Uniform Premium Table be used to determine the taxable amount? (Remember, this is not group insurance)
>
Only employer group life insurance gets favorable tax treatment. As this
is not group insurance, the premium payment is considered wages (Box 1
of the W-2) subject to payroll taxes and income tax withholding. The
amount of the insurance is not relevant.

gindie

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Sep 20, 2017, 9:16:29 PM9/20/17
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On Tuesday, September 19, 2017 at 2:24:36 PM UTC-4, Alan wrote:
> Only employer group life insurance gets favorable tax treatment. As this
> is not group insurance, the premium payment is considered wages (Box 1
> of the W-2) subject to payroll taxes and income tax withholding. The
> amount of the insurance is not relevant.
>

Thank you for the answer. It is as I suspected.

Is there a particular source I can point the employer to? He has received several conflicting answers from different accountants he has used over the years.

Alan

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Sep 22, 2017, 7:04:17 PM9/22/17
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On 9/20/17 6:13 PM, gindie wrote:
> On Tuesday, September 19, 2017 at 2:24:36 PM UTC-4, Alan wrote:
>> Only employer group life insurance gets favorable tax treatment. As this
>> is not group insurance, the premium payment is considered wages (Box 1
>> of the W-2) subject to payroll taxes and income tax withholding. The
>> amount of the insurance is not relevant.
>>
>
> Thank you for the answer. It is as I suspected.
>
> Is there a particular source I can point the employer to? He has received several conflicting answers from different accountants he has used over the years.
>
The best I can do for you is tell the employer to see IRS Pub 15
(Circular E)- Employers Tax Guide. It tells you that fringe benefits are
taxable wages. See also IRS Pub 15-A Employers Supplemental Tax Guide
with more info on Wages and finally IRS Pub 15-B Employers Tax Guide To
Fringe Benefits that has the info on those benefits that are not
taxable. There you will see that only Group Term Life Insurance can be
excluded from income.
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