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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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I handle 1099-Misc reporting for the Payables department of

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I handle 1099-Misc reporting for the Payables department of my company. We are starting to get check request to pay ex-employees for ARRA Subsidy Refunds on Cobra medical insurance premiums. What is the taxability status for the recipient?

No information reporting (e.g., Form W-2, Form 1099) of the COBRA premium subsidy is required to be provided to an assistance-eligible individual or to the IRS by an employer, insurer, or multiemployer plan.

However, high income individuals (i.e., those who have modified adjusted gross income for the taxable year in excess of $145,000, or $290,000 in the case of a joint filing) are not eligible for the subsidy. Presumably, in that case, the affected individuals will themselves report the amount of the subsidy they received (i.e., will add the improperly received subsidy to their federal tax liability in order to repay the subsidy). States may also tax the subsidy.

Since only certain individuals in higher tax brackets must report this as taxable income on their returns, you should not issue 1099 forms to people receiving this cobra subsidy. It will be up to those individuals in the higher income brackets to report any benefits they received.

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