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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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On February 2, 2008 I was declared totally disabled and began

Resolved Question:

On February 2, 2008 I was declared totally disabled and began receiving Long Term disability payments from my company's disability plan. I paid for the part of the plan that gave me 70% instead of 50% of my salary.   I had to file for Social Security benefits and was awarded full disability on August 5 and started receiving payments. The company's insurance administrator reduced my benefits by that amount. They also stopped taking any federal deductions from the amount that they pay me. Will I be liable for the those deductions when I file this year?
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.



When you receive disabiity payments from an employer sponsored plan that was entirely funded by your employer, then you would be responsibile for taxes on the entire amount received. However, if you paid the entire premium for the disability insurance, then the benefits are not taxable. If you paid for a portion of the premiums, then only the portion relating to the employer's premiums is taxable.


In order to figure how much of your company's disabiltiy benefit is taxable, you need to figure the percentage of the premium that you actually paid. As an example, if the total premium for this policy was $100 per month, and your employer paid $75 of the premium and you paid $25 of the premium, then you would be responsible for taxes on 75% of the benefits received from this policy.


In order to cover any taxes you may owe at the end of the year, you could request that the company's disability plan once again start withholding some taxes from your payments, or you may also elect to make estimated tax payments on your own.


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