During my employer's open enrollment for health insurance in Nov last year I selected for health benefits for myself and my domestic partner for 2013. In Jan 2013 I was informed via phone that because I did not have the necessary paperwork my partner could not be added to my health insurance and was not eligible to receive health benefits. Because of this conversation I did not complete my employer's required DP application or submit any documents, steps I was told are necessary for a DP to be approved.
In February my work schedule was reduced and I became ineligible for any benefits. Throughout the transition I spoke with HR and the benefits office to confirm that I would no longer be receiving benefits.
I recently reviewed my paystub and noticed a DP imputed tax
for the health insurance since the beginning of the year. As I was told my partner is not eligible for benefits and I myself am not eligible for benefits at all, I am confused about the tax and upset about the negative impact this is having on my tax liability. By the end of the year the DP imputed tax will be more than $5,000.
I contacted my employer and they refused to remove the tax stating, sometimes they approve domestic partners without documentation. And because they approved the DP, they stated that they needed notification back in February that my employment status was changing and my DP was no longer eligible for benefits. Only then could they have removed the tax.
This all seems a little suspect to me. Are they able to do this? What are my options if they won't remove the imputed tax? Do I have to sue them to get the correct information so I wont be penalized by the IRS?