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Tax Policy Issues

What is a tax policy?

Tax policy is a type of administrative apparatus that is developed to levy and collect taxes that are owed by individuals and corporations to the government. Tax is determined by applying various tariffs as outlined in the policy. Since changes in tax structures have an influence on individuals and corporations, it is important to understand exactly how tax policy works. . Listed below are questions answered by the Experts on Tax Policy issues.

What is the tax policy on insurance payments when an employer takes money out of an employee’s paycheck? What is the tax policy on insurance payments if the person pays it out of their own pocket?

When an employee’s insurance payments are withheld from their paycheck and payments made by the employer do not fall under a café 125 plan, the employee would be subjected to payroll and income tax. The employee, however, could claim expenses via Schedule A of their income tax return. In most cases, they would only benefit from expenses that are over 7.5% of their adjusted gross income. On the other hand, if the employee makes insurance payments out of their own pocket and the payments are not withheld from the paycheck, the amount would not be taxed.

If a person is a U.S. citizen but is originally from the United Kingdom and cased a life insurance policy that was based in the United Kingdom, what would be the tax policy on the money that they got from this life insurance policy?

If the person is a citizen of the United States, they would be responsible for filing a tax return on all income, even if it is income received from a life insurance policy in the United Kingdom. When the person files their income tax return, the income would be scrutinized and any taxes to be paid would be determined at this time. . Even if the income is not taxable in the United Kingdom, this would not affect the U.S. tax return. For more information on this, check the US-UK tax treaty

If a person runs a business, has left a full time job and wants to keep their insurance through their Consolidated Omnibus Budget Reconciliation Act (COBRA), could the person hire their spouse part time so that the insurance would be cheaper? How would this benefit the person with regard to tax policy?

In most cases, COBRA is just an extension of the person’s eligibility to be a part of their former employer’s health plan. Therefore, it is not in their name or in their business’ name. This subject has a lot of tax payers arguing that it is not right and out of step with the recent tax policy initiatives that have been put in place. It could be argued that, according to the statute under the IRC Section 162(l), COBRA payments should not be prohibited from health insurance deductions of the self employed. However, the IRS may not agree with this. If one or both spouses could or does have health insurance, they would not be able to use the tax deduction.

Can a U.S. resident be taxed on English Social Security Benefits that he is being paid?

Tax policy on English Social Security being paid to a U.S. resident says that the amount would generally be exempt from the U.S. income tax unless the recipient is both a resident and citizen of the United States. These funds include pensions paid by, or funds that are created by, the United Kingdom and its political subdivisions. For more information, read article 17, page 19 at: http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/uktreaty.pdf

Tax policy helps to regulate the manner in which taxes are paid to the government. There are several rules that govern tax policy and it is important for a taxpayer to understand them well. If you have questions on tax policy, put them to Tax Professionals now to get answers that are both quick and insightful.

Ask a Tax Professional

Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: General
Satisfied Customers: 572
Experience:  10 years experience
16356563
Type Your Tax Question Here...
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2 Tax Professionals are Online Now

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    Ask follow up questions if you need to.
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Tax Professionals are online & ready to help you now

Wallstreet Esq.
Tax Attorney
Satisfied Customers: 570
10 years experience
Wendy Reed
Enrolled Agent
Satisfied Customers: 3052
15+ years tax preparation and tax advice.
Mark D
Enrolled Agent
Satisfied Customers: 985
MBA, EA, Specializing in Business and Individual Tax Returns and Issues

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