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Lev
Lev, Tax Advisor
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Hi, I am an Arizona attorney currently on disability leave.

Customer Question

Hi,

I am an Arizona attorney currently on disability leave. How much would you charge to answer one question:

my disability insurance premiums were paid with after-tax dollars (no deduction was taken for the expenditure), and I need to know if there are ANY federal taxes (including social security and Medicare) or Arizona taxes that must be paid on the private disability benefits I will start receiving soon?

Thanks!!
Cameron
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

Please refer to the IRS publication 525 - http://www.irs.gov/pub/irs-pdf/p525.pdf page 17

 

Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income.

.................

If you pay the entire cost of an accident or health plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return.

.................

Long-term care insurance contracts generally are treated as accident and health insurance contracts. Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness.

 

Customer: replied 5 years ago.
OK, but will the plan withhold Social Security and/or Medicare (as an employer will)? And what about Arizona taxes?
Expert:  Lev replied 5 years ago.

Social Security and/or Medicare taxes are withheld from wages - non-taxable disability benefits are not wages and therefore FICA taxes are not due.

 

Arizona taxes are based on federal adjusted gross income - see line 12 - http://www.revenue.state.az.us/Forms/2007/140_2D.pdf

 

Additionals to income - see line 13 and Part B - there is no disability benefits that are non-taxable on the federal tax return - so such income is not taxable for Arizona as well.

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22969
Experience: Taxes, Immigration, Labor Relations
Lev and 6 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
OK, then my understanding is that I will not pay any taxes (AZ &Fed.) for my disability income. If that is incorrect, please let me know and I will release the payment to you.

Thanks!!!
Expert:  Lev replied 5 years ago.

I agree with you - based on the information you provided - this income is not taxable neither on federal level nor for Arizona.

Please provide all information above to your tax preparer for considerations.

 

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Lev
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Taxes, Immigration, Labor Relations