refusal to change incorrect W2
still_livin
did not pay me and they refuse to change it. The situation is as
follows. I was receiving long term disability payments from an
insurance company until my Social Security was approved and I received
a lump sum for back pay from Social Security, my son was also entitled
to benefits but turned 18 by the time the lump sum payments were paid.
The payment made to him was under his social security number and he
received a form SSA-1099 in his name making him responsible for the
taxes. My LTD insurer demanded that I repay both lump sum amounts and
when I refused they stopped paying me which they could do according to
the policy. They are witholding my benefits until both amounts are
repaid even though my son was an adult and the money was paid in his
name. Instead of sending me a statement every year showing the amount
of money they have recouped each year that I paid taxes on in a
previous year they continue sending a W2 as if they are paying me and
I have received nothing for the time the W2 covers. I called the IRS
and complained and the company was sent a request to correct the W2
but they have not and refuse to do so. I followed the instructions
given to me by the IRS and filled out a form 4852 and sent it with my
taxes. I paid taxes on the money received from Social Security as well
as the money received in previous years from the Insurance company and
should now be able to deduct the amount of money the insurance company
is now recouping as an overpayment. The insurance company has
continued filing W2s with the sick pay box checked as if they are
still paying me. How can I stop them from doing this as I shouldn't
have to pay taxes on money I am not receiving because I already did in
previous years. Thanks for any advice.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
Arthur Kamlet
This is a nasty situaion which is against you in many ways.
You had to make a repayment when you fully expected to be able to
keep the money. In efect you had to repay the company so it
in turn could repay social security.
The company is deemed to have made payments to you, as the payments
were available to you for the taking. And then for the repaying.
By not cooperating with them, you did not change the fact the money
was constructively offerred and received even though you never
took it.
You entered the world of Repayments of income, and if thhe repayment
was more than $3,000 you have a "claim of right" to seek tax relief.
You Substitute for a W-2 to try to say the 3rd Party Sick Pay income
was never received should not be accepted by the IRS as it was made
constructively available to you, even though it later had to be
repaid.
And unfortunately you cannot just reduce the repayments from the
income because, well, maybe because that would be too logical and
simple, and neither term applies to much of the tax code.
But this occurs so often the IRS has a pretty good description of
how you should treat Repayments on your tax return (and of
course you are expected to treat the reported third party sick pay
as taxable income.)
See Repayments http://www.irs.gov/pub/irs-pdf/p525.pdf in Pub 525,
and the discussion of how to get tax relief based on your Claim of
Right, either as a tax credit or as an itemized miscellaneous
deduction not subject to the 2% of AGI reduction.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
Stuart A. Bronstein
> And unfortunately you cannot just reduce the repayments from the
> income because, well, maybe because that would be too logical and
> simple, and neither term applies to much of the tax code.
Can OP just send the company a 1099 and then deduct it from what he
received?
--
Stu
http://downtoearthlawyer.com
Arthur Kamlet
Stuart A. Bronstein <spam...@lexregia.com> wrote:
>kam...@panix.com (Arthur Kamlet) wrote:
>
>> And unfortunately you cannot just reduce the repayments from the
>> income because, well, maybe because that would be too logical and
>> simple, and neither term applies to much of the tax code.
>
>Can OP just send the company a 1099 and then deduct it from what he
>received?
Nope.
At least if you follow Pub 525 Repayments, there are only two pathways
avaialble. Either the claim of right tax recalcualtion, or the
Schedule A full, not 2%, deduction.
I'm thinking the claim of right doctrine isn't even in the code,
but follows court decisions, but I haven't tried to track that down.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
Alan
> In article <Xns9CC99924F7584s...@130.133.1.4>,
> Stuart A. Bronstein <spam...@lexregia.com> wrote:
>> kam...@panix.com (Arthur Kamlet) wrote:
>>
>>> And unfortunately you cannot just reduce the repayments from the
>>> income because, well, maybe because that would be too logical and
>>> simple, and neither term applies to much of the tax code.
>> Can OP just send the company a 1099 and then deduct it from what he
>> received?
>
> Nope.
>
> At least if you follow Pub 525 Repayments, there are only two pathways
> avaialble. Either the claim of right tax recalcualtion, or the
> Schedule A full, not 2%, deduction.
>
>
> I'm thinking the claim of right doctrine isn't even in the code,
> but follows court decisions, but I haven't tried to track that down.
Arthur Kamlet
Alan <sfcn...@yahoo.com> wrote:
>Arthur Kamlet wrote:
>> In article <Xns9CC99924F7584s...@130.133.1.4>,
>> Stuart A. Bronstein <spam...@lexregia.com> wrote:
>>> kam...@panix.com (Arthur Kamlet) wrote:
>>>
>>>> And unfortunately you cannot just reduce the repayments from the
>>>> income because, well, maybe because that would be too logical and
>>>> simple, and neither term applies to much of the tax code.
>>> Can OP just send the company a 1099 and then deduct it from what he
>>> received?
>>
>> Nope.
>>
>> At least if you follow Pub 525 Repayments, there are only two pathways
>> avaialble. Either the claim of right tax recalcualtion, or the
>> Schedule A full, not 2%, deduction.
>>
>>
>> I'm thinking the claim of right doctrine isn't even in the code,
>> but follows court decisions, but I haven't tried to track that down.
>It's actually Title 26 Section 1341.
>
>http://tinyurl.com/ykyntjf
Thanks Alan.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
Alan
> In article <he7bdb$c95$1...@news.eternal-september.org>,
> Alan <sfcn...@yahoo.com> wrote:
>> Arthur Kamlet wrote:
>>> In article <Xns9CC99924F7584s...@130.133.1.4>,
>>> Stuart A. Bronstein <spam...@lexregia.com> wrote:
>>>> kam...@panix.com (Arthur Kamlet) wrote:
>>>>
>>>>> And unfortunately you cannot just reduce the repayments from the
>>>>> income because, well, maybe because that would be too logical and
>>>>> simple, and neither term applies to much of the tax code.
>>>> Can OP just send the company a 1099 and then deduct it from what he
>>>> received?
>>> Nope.
>>>
>>> At least if you follow Pub 525 Repayments, there are only two pathways
>>> avaialble. Either the claim of right tax recalcualtion, or the
>>> Schedule A full, not 2%, deduction.
>>>
>>>
>>> I'm thinking the claim of right doctrine isn't even in the code,
>>> but follows court decisions, but I haven't tried to track that down.
>> It's actually Title 26 Section 1341.
>>
>> http://tinyurl.com/ykyntjf
>
>
> Thanks Alan.
"If method 1 results in less tax, deduct the amount repaid. If method 2
results in less tax, claim the credit figured in (3) above on Form 1040,
line 68, and enter �I.R.C. 1341� in the column to the right of line 68."
still_livin
> >>> Stuart A. Bronstein <spamt...@lexregia.com> wrote:
> >>>> kam...@panix.com (Arthur Kamlet) wrote:
>
> >>>>> And unfortunately you cannot just reduce the repayments from the
> >>>>> income because, well, maybe because that would be too logical and
> >>>>> simple, and neither term applies to much of the tax code.
> >>>> Can OP just send the company a 1099 and then deduct it from what he
> >>>> received?
> >>> Nope.
>
> >>> At least if you follow Pub 525 Repayments, there are only two pathways
> >>> Schedule A full, not 2%, deduction.
>
> >>> I'm thinking the claim of right doctrine isn't even in the code,
> >>> but follows court decisions, but I haven't tried to track that down.
> >> It's actually Title 26 Section 1341.
>
> >>http://tinyurl.com/ykyntjf
>
> > Thanks Alan.
>
> By the way.. if you look at Pub 525, it tells you it derives from Sec. 1341.
>
> "If method 1 results in less tax, deduct the amount repaid. If method 2
> results in less tax, claim the credit figured in (3) above on Form 1040,
> line 68, and enter �I.R.C. 1341� in the column to the right of line 68."
Thanks, I am aware of that way to deal with the money I paid taxes on
previously that was now being returned but that doesn't address a W2
reporting income I never received.
still_livin
> In article <ac694afc-2d04-4b4a-b37c-a73544b93...@j19g2000yqk.googlegroups.com>,
> and the discussion of how to get tax relief based on your Claim of
> Right, either as a tax credit or as an itemized miscellaneous
> deduction not subject to the 2% of AGI reduction.
> --
>
> ArtKamlet �at �a o l dot c o m �Columbus OH �K2PZH
"You had to make a repayment when you fully expected to be able to
keep the money. In effect you had to repay the company so it
in turn could repay social security. "
First of all thanks for your help! The LTD Company does not have to
give any money to social security, they keep it and yet still file a
W2 on me as if they paid me. According to the policy which premiums
were paid for, they could reduce the benefits they paid me by their
own calculations of what they decided I should receive from Social
Security once approved. Which they did and stopped further payments to
me until they recouped what their own calculations said they could.
The W2s they have filed for money they did not send me should be fraud
on their part if they are taking that amount of money and including it
to reduce their own tax burden. If I include the amount of money on
the W2 that I did not receive in my tax calculations it puts me in a
higher tax bracket and I would owe nearly half of my social security
received to the IRS leaving myself and family homeless. Not to mention
not being able to recoup previous years taxes paid on the money they
have kept. I have yet to find any circumstance giving a company the
right to file a W2 on a person where no money was received by the
person. When I have contacted the insurance company about this they
basically refuse to justify it and hang up on me. One person at the
company said I would receive a letter the following year saying I
never received the money reported on the W2. They are basically making
it impossible for me to file my taxes on time because I would not have
the money to pay the IRS for the increased taxes on money I never got.
The IRS told me to file a form 4852 in place of the W2 but that I have
to wait until after Sept 15th to file to give the Insurance company
time to correct the W2, which as I said they refuse to do. One person
at the IRS asked me to prove I never got the money, how do I prove a
negative? Shouldn't the insurance company have to prove through
canceled checks that they paid me? Meanwhile I am close to foreclosure
on my house because I can't get the refund I am owed from 2006. I
tried to get help from legal aid and they essentially gave up after a
few bouts with the insurance company.
Arthur Kamlet
still_livin <m37d...@comcast.net> wrote:
>On Nov 20, 11:39�pm, Alan <sfcnm-...@yahoo.com> wrote:
>> Arthur Kamlet wrote:
>> > In article <he7bdb$c9...@news.eternal-september.org>,
>> >> Arthur Kamlet wrote:
>> >>> In article <Xns9CC99924F7584spamtraplexregia...@130.133.1.4>,
>> >>> Stuart A. Bronstein <spamt...@lexregia.com> wrote:
>> >>>> kam...@panix.com (Arthur Kamlet) wrote:
>>
>> >>>>> And unfortunately you cannot just reduce the repayments from the
>> >>>>> income because, well, maybe because that would be too logical and
>> >>>>> simple, and neither term applies to much of the tax code.
>> >>>> Can OP just send the company a 1099 and then deduct it from what he
>> >>>> received?
>> >>> Nope.
>>
>> >>> At least if you follow Pub 525 Repayments, there are only two pathways
>> >>> Schedule A full, not 2%, deduction.
>>
>> >>> I'm thinking the claim of right doctrine isn't even in the code,
>> >>> but follows court decisions, but I haven't tried to track that down.
>> >> It's actually Title 26 Section 1341.
>>
>> >>http://tinyurl.com/ykyntjf
>>
>> > Thanks Alan.
>>
>> By the way.. if you look at Pub 525, it tells you it derives from Sec. 1341.
>>
>> "If method 1 results in less tax, deduct the amount repaid. If method 2
>> results in less tax, claim the credit figured in (3) above on Form 1040,
>
>Thanks, I am aware of that way to deal with the money I paid taxes on
>previously that was now being returned but that doesn't address a W2
>reporting income I never received.
The company poperly considers that you constructively received
the money.
You have to declare the income in order to invoke your claim of right
to either take a schdule A credi or a tax credit to reduce the tax
consequnce.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
Arthur Kamlet
Right - the company asked for payback due to social security payments
made to you.
And I'll bet in the policy language they can certainly do that.
So re-read all I stated above, and then realize you would have to
declare the income constructively received, then decide if you ae
better off taking the deduction on Sch A or calculating the tax crdit.
Their W-2 is almost certainly right, and your options are te deduction
or the tax credit.
I think you are trying to apply logic, such as "I never saw those dollars
so why should they be income to me?" but it is income "constructively
received." It is income you should be declaring on your W-2. And then
invoking the better of the two Claim of Right recoveries.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
still_livin
> In article <707820a8-8135-4dcf-b345-eb9ca911e...@e23g2000yqd.googlegroups.com>,
The issue still remains that I would never actually recover the taxes
paid in the previous years if I am required to accept the W2 as
earnings during the time I actually received no money. As an example ,
for a given tax year I add the amount on the W2 to my gross income
then deduct the same on schedule A thereby canceling the additional
income I didn't receive that year, that still leaves me with no way to
recover the taxes paid in the previous year not to mention the portion
of the money that my son received as income under his social security
number that the insurance company is reducing my benefits by but
filing a W2 under my social security number for that amount as well.
Am I missing some part of the picture here? It still appears to me
that this will never balance out. If this is correct the IRS told me
wrong and my last 3 years of filings are wrong and I am in serious tax
trouble. Thanks for the info.
Arthur Kamlet
I think I've gone as far as it goes here. If you don't believe what
I've said, and the references I've suggested, then seek local
professional advice from someone whose experience and practice
includes filing claim of right credits or deductions.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
Mark Bole
>>>>>> did not pay me and they refuse to change it. The situation is as
>>>>>> follows. I was receiving long term disability payments from an
>>>>>> My LTD insurer demanded that I repay both lump sum amounts and
>>>>>> when I refused they stopped paying me which they could do according to
>>>>>> the policy.
They didn't stop paying you, they are simply redirecting the payments to
your balance due, since you refused to pay it directly.
You've received money, paid tax on it, but now it turns out the money
doesn't belong to you. As you return it, you have a claim of right
deduction (or credit) for the taxes you paid on it.
It was your decision to pay it back out of future "earnings" instead of
cash on hand, but that doesn't change the basic concept.
>> The issue still remains that I would never actually recover the taxes
>> paid in the previous years if I am required to accept the W2 as
>> earnings during the time I actually received no money. As an example ,
>> for a given tax year I add the amount on the W2 to my gross income
>> then deduct the same on schedule A thereby canceling the additional
>> income I didn't receive that year, that still leaves me with no way to
>> recover the taxes paid in the previous year
You've got it backwards. The deduction on Schedule A *is* for the taxes
you paid in the previous year. You still owe current tax on the current
payments you are simultaneously receiving and using to pay back the
money you are obliged to return.
>> of the money that my son received as income under his social security
>> number that the insurance company is reducing my benefits by but
>> filing a W2 under my social security number for that amount as well.
Well, it was nice that SSA paid money to your son even though he wasn't
disabled, no? I prefer to get money and pay tax on it versus get no
money. There's also a lesson here that many parents learn -- unearned
income that belongs to minor children has a funny way of not being used
according to the parent's wishes.
>> Am I missing some part of the picture here? It still appears to me
>> that this will never balance out. If this is correct the IRS told me
>> wrong and my last 3 years of filings are wrong and I am in serious tax
>> trouble. Thanks for the info.
You haven't given any information why your last three years of filings
might be wrong. You had free use of money that isn't yours and the
luxury of an interest-free installment plan to pay it back.
> I think I've gone as far as it goes here. If you don't believe what
> I've said, and the references I've suggested, then seek local
> professional advice from someone whose experience and practice
> includes filing claim of right credits or deductions.
Art is correct, but I'll give it one last try. Here is the IRS written
information that pertains to your situation. Again, remember that the
claim of right deduction/credit you take *now* is to offset the taxes
you paid in a *previous* year. The taxes you pay on taxable income in
the *current* year has nothing to do with it, even if the income is
being used to pay off an obligation.
Pub 915:
"Disability payments. You may have received disability payments from
your employer or an insurance company that you included as income on
your tax return in an earlier year. If you received a lump-sum payment
from SSA or RRB, and you had to repay the employer or insurance company
for the disability payments, you can take an itemized deduction for the
part of the payments you included in gross income in the earlier year.
If the amount you repay is more than $3,000, you may be able to claim a
tax credit instead."
-Mark Bole
HLunsford
> kam...@panix.com (Arthur Kamlet) wrote:
>
>> And unfortunately you cannot just reduce the repayments from the
>> income because, well, maybe because that would be too logical and
>> simple, and neither term applies to much of the tax code.
>
> Can OP just send the company a 1099 and then deduct it from what he
> received?
>
ChEAr$,
Harlan
Seth
numbers to make the example concrete.
OP had a long-term disability policy, that guaranteed income of
$4000/month inclusive of Social Security.
January 2008 he became disabled, and filed with SS. The insurance
company paid him $4000/month. At the end of 2008, it send a W2 for
$48,000.
January 2009 SS ruled he was eligible for $2000/month from them, and
sent him a catch-up check for $24,000. The insurance company asked OP
to send them the $24,000, but OP didn't.
So the insurance company set OP's payments to $2,000/month, and
withheld the first $24,000 of them, paying him nothing in 2009.
For 2009, SS sends OP a W2 for $48,000 (the total amount they paid
him). The insurance company is apparently also sending a W2 for
$24,000 (the amount they would have paid him if he gave it to them
first). So he's getting W2s for $72,000, despite receiving only
$48,000 in income. That seems quite wrong.
If I offer to pay you $10,000 provided that you pay me $10,000 first,
somehow I don't think that puts you in "constructive receipt" of the
$10,000. Under that theory, OP is not in constructive receipt of any
money from the insurance company that they didn't actually pay him.
I realize that if OP had paid the insurance company the $24,000, he
could have deducted it. In effect (according to the insurance
company), they're paying him $2,000/month (their W2 claims) and then
taking it back. Can't he deduct the "taking it back" the same as if
he'd voluntarily handed over $24,000? The effect is certainly the
same.
Seth
Tom Russ
> I don't understand what's going on here. �I'm going to make up some
> numbers to make the example concrete.
An excellent idea. Perhaps this will help finally put this thread to
rest.
Here are my comments, largely a restatement of what others said, and
with the disclaimer that I am not a tax professional (nor do I play
one on TV).
> OP had a long-term disability policy, that guaranteed income of
> $4000/month inclusive of Social Security.
>
> January 2008 he became disabled, and filed with SS. �The insurance
> company paid him $4000/month. �At the end of 2008, it send a W2 for
> $48,000.
OK. So far everything seems normal.
> January 2009 SS ruled he was eligible for $2000/month from them, and
> sent him a catch-up check for $24,000. �The insurance company asked OP
> to send them the $24,000, but OP didn't.
>
> So the insurance company set OP's payments to $2,000/month, and
> withheld the first $24,000 of them, paying him nothing in 2009.
>
> For 2009, SS sends OP a W2 for $48,000 (the total amount they paid
> him). �The insurance company is apparently also sending a W2 for
> $24,000 (the amount they would have paid him if he gave it to them
> first). �So he's getting W2s for $72,000, despite receiving only
> $48,000 in income. �That seems quite wrong.
OK. This is the point where the "claim of right" doctrine kicks in.
Because the OP received $24,000 from the insurance company that he was
required to repay (and which he did repay -- through insurance company
"withholding"), he has the ability to handle the $24,000 that was
repaid to the insurance company using the claim or right rules.
So he can take a Schedule A deduction for $24,000 (which brings his
taxable income back down to the $48,000 he actually received) so
everything is OK.[*]
There is also an alternate tax-credit option that could be used
instead. But I don't know how that option works. But the OP can use
whichever one gets him the best result.
>...
> I realize that if OP had paid the insurance company the $24,000, he
> could have deducted it. �In effect (according to the insurance
> company), they're paying him $2,000/month (their W2 claims) and then
> taking it back. �Can't he deduct the "taking it back" the same as if
> he'd voluntarily handed over $24,000? �The effect is certainly the
> same.
Yes. That is exactly what the claim of right procedure allows the OP
to do.
[Well, almost anyway. With the phase-outs and AGI-related items this
may not quite be the same as not getting the money in the first
place. I wonder why the claim of right isn't an above the line
deduction from income. That would seem to be the more logical (I
know, I know) procedure.]
DF2
>I don't understand what's going on here. I'm going to make up some
>numbers to make the example concrete.
>
>OP had a long-term disability policy, that guaranteed income of
>$4000/month inclusive of Social Security.
>
>January 2008 he became disabled, and filed with SS. The insurance
>company paid him $4000/month. At the end of 2008, it send a W2 for
>$48,000.
>
>January 2009 SS ruled he was eligible for $2000/month from them, and
>sent him a catch-up check for $24,000. The insurance company asked OP
>to send them the $24,000, but OP didn't.
>
>So the insurance company set OP's payments to $2,000/month, and
>withheld the first $24,000 of them, paying him nothing in 2009.
>
>For 2009, SS sends OP a W2 for $48,000 (the total amount they paid
>him). The insurance company is apparently also sending a W2 for
>$24,000 (the amount they would have paid him if he gave it to them
>first). So he's getting W2s for $72,000, despite receiving only
>$48,000 in income. That seems quite wrong.
The insurance company in the example has sent him a W2 for $48,000
and another W2 for $24,000, for a total of $72000. They sent him
only $48,000 total. Is that legal?
I assume the missing $24000 is not being paid by the insurance
company to the Social Security Administration nor to the IRS.
Mark Bole
> The insurance company in the example has sent him a W2 for $48,000
> and another W2 for $24,000, for a total of $72000. They sent him
> only $48,000 total. Is that legal?
No, they paid (are paying) $72K, but $24K of it was (is being) paid
back, for a net of $48K over the two year period.
> I assume the missing $24000 is not being paid by the insurance
> company to the Social Security Administration nor to the IRS.
>
It's not "missing". Not sure what the insurance company paying SSA has
to do with it.
It's no different than you getting a claim payment from your auto
insurer after a collision, then later you get a payment from the other
driver's insurance company, so you have to pay your company back per
your insurance contract. That doesn't mean your insurance company is
paying anything to the other insurance company.
-Mark Bole
Seth
DF2 <replyvia@newsgroup_please.invalid> wrote:
>In misc.taxes.moderated, Seth wrote:
>
>>I don't understand what's going on here. I'm going to make up some
>>numbers to make the example concrete.
>>
>>OP had a long-term disability policy, that guaranteed income of
>>$4000/month inclusive of Social Security.
>>
>>January 2008 he became disabled, and filed with SS. The insurance
>>company paid him $4000/month. At the end of 2008, it send a W2 for
>>$48,000.
>>
>>January 2009 SS ruled he was eligible for $2000/month from them, and
>>sent him a catch-up check for $24,000. The insurance company asked OP
>>to send them the $24,000, but OP didn't.
>>
>>So the insurance company set OP's payments to $2,000/month, and
>>withheld the first $24,000 of them, paying him nothing in 2009.
>>
>>For 2009, SS sends OP a W2 for $48,000 (the total amount they paid
>>him). The insurance company is apparently also sending a W2 for
>>$24,000 (the amount they would have paid him if he gave it to them
>>first). So he's getting W2s for $72,000, despite receiving only
>>$48,000 in income. That seems quite wrong.
>
>The insurance company in the example has sent him a W2 for $48,000
>and another W2 for $24,000, for a total of $72000. They sent him
>only $48,000 total. Is that legal?
Their reasoning is that in 2009, they paid him $24,000, and he used it
(involuntarily) to repay them the $24,000 he owed them (due to the SS
back payment).
>I assume the missing $24000 is not being paid by the insurance
>company to the Social Security Administration nor to the IRS.
They should report the $24,000 as repaid by OP (just as if he'd sent
them a check as soon as SS send him the $24,000).
Seth
still_livin
>
> [Well, almost anyway. �With the phase-outs and AGI-related items this
> may not quite be the same as not getting the money in the first
> place. �I wonder why the claim of right isn't an above the line
> deduction from income. �That would seem to be the more logical (I
> know, I know) procedure.]
income credit of nearly $2500 following the Schedule A Deduction. It
also made more of my SSD payments taxable. It also is still not
evident to me how I am going to recover the taxes I paid on the money
when I actually got it. Turns out it isn't a matter of adding it in
one column and removing it from another.
HLunsford
> I am working the different solutions at this time and am losing earned
> income credit of nearly $2500 following the Schedule A Deduction. It
> also made more of my SSD payments taxable. It also is still not
> evident to me how I am going to recover the taxes I paid on the money
> when I actually got it. Turns out it isn't a matter of adding it in
> one column and removing it from another.
>
Our best advice to you still is to seek help with a local tax pro in
your area, showing him all correspondence from the insurance company
relating to their "withholding" payments for the pay back, etc, their
letters of explanation, etc.
I have a client who in 2009 had to pay back amounts in just such a case
as yours. In his case he went ahead and wrote the check, so it will be
dealt with as per publication 525. However if he had not done so, I
suppose he would also be getting a W2 from the insurance company.
ChEAr$,
Harlan Lunsford, EA n LA
DF2
>DF2 wrote:
>
>> The insurance company in the example has sent him a W2 for $48,000
>> and another W2 for $24,000, for a total of $72000. They sent him
>> only $48,000 total. Is that legal?
>
>No, they paid (are paying) $72K, but $24K of it was (is being) paid
>back, for a net of $48K over the two year period.
>
>> I assume the missing $24000 is not being paid by the insurance
>> company to the Social Security Administration nor to the IRS.
>>
>
>It's not "missing".
That $24000 never existed?
> Not sure what the insurance company paying SSA has
>to do with it.
When you get a W2, some money has been paid to you in checks. Some
has been paid to your account for income tax withholding, FICA,
medical insurance, etc. But it has all been paid to somebody. In
this case, much of the W2 total has not been paid, and was not
offered to be paid, to anybody.
That W2 I assumeD also represents expense to the insurance company,
that reduces their income tax. Now maybe it does not, and so the
insurance company may not actually getting a windfall. I am
inferring you are saying that the W2 does not necessarily represent
an expense for the insurance company for income tax purposes.
>
>It's no different than you getting a claim payment from your auto
>insurer after a collision, then later you get a payment from the other
>driver's insurance company, so you have to pay your company back per
>your insurance contract. That doesn't mean your insurance company is
>paying anything to the other insurance company.
The car insurance did not send me a W2, and the IRS did not consider
the money as taxable income to me.
What stops the annuity insurance company in the case from issuing a
corrected W2 for the earlier year? Would it be forbidden by law?
Suppose this person had converted an IRA to a Roth, and this phantom
income drove him over the MAGI line?
DF2
>In article <c2lqg511b9b6khe1h...@4ax.com>,
>DF2 <replyvia@newsgroup_please.invalid> wrote:
>>The insurance company in the example has sent him a W2 for $48,000
>>and another W2 for $24,000, for a total of $72000. They sent him
>>only $48,000 total. Is that legal?
>
>Their reasoning is that in 2009, they paid him $24,000, and he used it
>(involuntarily) to repay them the $24,000 he owed them (due to the SS
>back payment).
>
>>I assume the missing $24000 is not being paid by the insurance
>>company to the Social Security Administration nor to the IRS.
>
>They should report the $24,000 as repaid by OP (just as if he'd sent
>them a check as soon as SS send him the $24,000).
So he has the same money on his AGI line for two years? Suppose he
does not itemize.
Had he repaid the $24,000 with a check in 2009, would they have been
obligated to give him a corrected 2008 W2?
Mark Bole
> That $24000 never existed?
No, they paid it to him. When SSA finally approved his claim and paid
him a lump sum, he was obligated to pay the disability insurer back. He
didn't. So they are taking it out of current payments.
> When you get a W2, some money has been paid to you in checks. Some
> has been paid to your account for income tax withholding, FICA,
> medical insurance, etc. But it has all been paid to somebody. In
> this case, much of the W2 total has not been paid, and was not
> offered to be paid, to anybody.
He got the money in advance, if you will. He is now paying it back
through garnishment, if you will, of his current payments.
>
> That W2 I assumeD also represents expense to the insurance company,
> that reduces their income tax. Now maybe it does not, and so the
> insurance company may not actually getting a windfall. I am
> inferring you are saying that the W2 does not necessarily represent
> an expense for the insurance company for income tax purposes.
It's a wash for the insurance company. $24K paid out, $24K refunded.
The only windfall was to our OP, who got (using Seth's made up numbers),
what amounts to a $24K interest-free loan against his future payments.
> Suppose this person had converted an IRA to a Roth, and this phantom
> income drove him over the MAGI line?
Like anyone else, he could recharacterize his conversion to undo it.
-Mark Bole
Mark Bole
> So he has the same money on his AGI line for two years? Suppose he
> does not itemize.
He'd be foolish not to itemize if his itemized deductions, including the
claim of right deduction, was greater than his standard deduction. But
the alternative of a credit may be a better deal. The only way to tell
is to run the numbers both ways.
> Had he repaid the $24,000 with a check in 2009, would they have been
> obligated to give him a corrected 2008 W2?
No. Please go back and re-read the paragraph from Pub 915 that I
previously posted.
-Mark Bole
DF2
>DF2 wrote:
>
>> That $24000 never existed?
>
>No, they paid it to him. When SSA finally approved his claim and paid
>him a lump sum, he was obligated to pay the disability insurer back. He
>didn't. So they are taking it out of current payments.
>
>
>> When you get a W2, some money has been paid to you in checks. Some
>> has been paid to your account for income tax withholding, FICA,
>> medical insurance, etc. But it has all been paid to somebody. In
>> this case, much of the W2 total has not been paid, and was not
>> offered to be paid, to anybody.
>
>He got the money in advance, if you will. He is now paying it back
>through garnishment, if you will, of his current payments.
I know you know that he is getting more income reported on his W2s
and SSA-1099 than he got, however you allocate the money. So
whatever the money reported as paid to him minus what he actually
got is what I see as phantom money. You could call the difference
what you wish.
>
>>
>> That W2 I assumeD also represents expense to the insurance company,
>> that reduces their income tax. Now maybe it does not, and so the
>> insurance company may not actually getting a windfall. I am
>> inferring you are saying that the W2 does not necessarily represent
>> an expense for the insurance company for income tax purposes.
>
>It's a wash for the insurance company. $24K paid out, $24K refunded.
>The only windfall was to our OP, who got (using Seth's made up numbers),
>what amounts to a $24K interest-free loan against his future payments.
>
>> Suppose this person had converted an IRA to a Roth, and this phantom
>> income drove him over the MAGI line?
>
>Like anyone else, he could recharacterize his conversion to undo it.
Unlike everybody else with the same income (assuming certain levels
other income that we could incorporate into the example), he would
be forced to recharacterize.
I understand that you are describing the view of the law, and that
you don't actually confuse that with reasonableness or fairness.
Gene E. Utterback, EA, RFC, ABA
news:18b8ece8-bc34-41cb...@f10g2000vbl.googlegroups.com...
>
>>
>> [Well, almost anyway. With the phase-outs and AGI-related items this
>> may not quite be the same as not getting the money in the first
>> place. I wonder why the claim of right isn't an above the line
>> deduction from income. That would seem to be the more logical (I
>> know, I know) procedure.]
> I am working the different solutions at this time and am losing earned
> income credit of nearly $2500 following the Schedule A Deduction. It
> also made more of my SSD payments taxable. It also is still not
> evident to me how I am going to recover the taxes I paid on the money
> when I actually got it. Turns out it isn't a matter of adding it in
> one column and removing it from another.
I'm with Harland and Art on this one - you've gotten some guidance here that
I believe is correct and sound, that you don't understand it or want to
accept it doesn't change it (I am NOT trying to sound like a hardA**).
I know it doesn't sound fair and it may not be fair, sadly fairness and
logic have little place in the tax code.
What you NEED to do is to sit down with a tax pro (EXPECT TO PAY A FEE) and
have them explain it to you so you can understand. Your other alternative,
and I do NOT recommend it, is to make an appointment with an IRS office and
ask them to explain the intricacies to you. I don't recommend this because
it is very likely that you'll get someone at the IRS that doesn't understand
it any better than you do.
Your only viable option is to hire a pro - maybe see if there is a Volunteer
Income Tax Assistance Center near you OR contact the nearest law school.
Many times the law schools have free tax clinics for low income taxpayers.
The one thing you can bet on is this - this is NOT going to go away simply
because you think it isn't right. Your choices at this point are to roll
over or prove them wrong and it isn't likely you'll be able to prove them
wrong on your own (otherwise you'd have done so by now).
Sorry,
Gene E. Utterback, EA, RFC, ABA