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What is considered income?


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#1 haragirl

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Posted 26 December 2012 - 01:49 PM

I am going to put my domestic partner on my health insurance. The value of the insurance is considered taxable income, because we are not married, and will show up as such on my W-2, although I will not be getting any money from it. My girlfriend is going to pay the extra tax that I will owe because of the situation, but I am worried that it will also be considered income in terms of child support and she will also have to pay a percentage to my ex-wife. I can get a letter from work explaining the situation, but I think my ex will want what she can get and demand it. Does anybody know the law for this? I can't afford to go through an attorney again.

#2 adjusterjack

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Posted 26 December 2012 - 03:15 PM

You might not have a problem.

According to the IRS W-2 instructions:


Cost of employer-sponsored health coverage (if such cost is provided by the employer).
The reporting in Box 12, using Code DD, of the cost of employer-sponsored health coverage is for your information only. The amount reported with Code DD is not taxable.


See:

http://www.irs.gov/pub/irs-pdf/fw2.pdf

If it's true that the the amount paid by the employer is shown separately in Box 12 and is not taxable, then you would not report it on your tax return and probably not have to show it as income on anything else.

Ask your employer if he fills out the W-2s that way.

If yes, then just make sure you and your girlfriend keep your mouths shut as to her being covered on your medical insurance. Nobody needs to know about it.

Warning: Legal issues are complicated. Explanations and comments here are simplified and might not fully explain the ramifications of your particular issue. I am not a lawyer. I do not give legal advice. I make comments based on my knowledge and experience. I guarantee nothing. If you act on my comments without the advice of an attorney, you do so at your own risk.


#3 Tax_Counsel

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Posted 27 December 2012 - 12:10 AM

You might not have a problem.


The cost of the employer provided insurance for the girlfriend is taxable income and must be included in wages unless the girlfriend qualifies as the OP's dependent. The rule is clearly spelled out in Treas. Reg. § 1.106-1: “The gross income of an employee does not include contributions which his employer makes to an accident or health plan for compensation (through insurance or otherwise) to the employee for personal injuries or sickness incurred by him, his spouse, or his dependents, as defined in section 152.” (Italics added.)

If it’s included in income on the W-2, the reimbursement from the girlfriend for it won’t also result in income to the OP for federal income tax purposes. And although the OP did not specify what state’s law applies for the child support determination, I think it likely that the state would not count the girlfriend’s reimbursement as income for child support purposes either. Counting that reimbursement would effectively double count the income.

#4 haragirl

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Posted 28 December 2012 - 12:25 PM

Thanks for the advice. One thing I thought of after I posted was that I think my support is supposed to come from my net income. If that is the case does that mean this isn't an issue? My gross would look big when she looks at my tax returns, but I'm claiming single, one dependent, and she will see that I'm actually paying a lot in taxes, since the 'income' from the health insurance is all my responsibility, tax-wise, and not my employer's, so she should accept my explanation - with documentation - about the health insurance. Do you think that takes care of it?

#5 Guest_FindLaw_Amir_*

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Posted 28 December 2012 - 12:35 PM

You may wish to visit the Family Law Center: Child Support and read Child Support: Determining Parents' Income as a good resource to learn more about this subject matter.

#6 haragirl

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Posted 28 December 2012 - 12:46 PM

Thanks for the link. I had already looked at that, and I don't think it addresses my specific issue. The problem is, this is not income. The IRS says it is taxable as income, because my girlfriend not being my spouse makes her ineligible for tax-exempt coverage, but nobody is getting any money. They are going to deduct her premiums from my check, the same as they do for the premiums for me and my kids, but it will be on a post-tax basis. I am paying for this insurance (and she is paying me back), it's just the value of the insurance that is going into my gross on my W-2 (my employer did say it would all be on one line, no differentiation as to what type of income it is). I am not trying to hide income from my ex - just trying to not pay 28% on money that never actually existed.




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