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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15182
Experience:  15years with H & R Block. Divisional leader, Instructor
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If I paid 100% of my Long Term Disability premium and the employer

Customer Question

If I paid 100% of my Long Term Disability premium and the employer paid none, but did not withold taxes against the $25.50 premium I paid, are my benefits taxable. I can see them taxing the benefit if I paid none or a portion of the premium, but I paid it all. It is not a cafeteria plan, it is an optional benefit take it or leave it. The premium is not deducted from the salary and the rest used as taxable income like 401k. It is like the medical benefits, they count it as salary, ee pays 100% then employer doesn't tax premium.
Submitted: 6 years ago.
Category: Tax
Expert:  Robin D. replied 6 years ago.

Robin D :

You must report as income any amount you receive for your disability through an accident or health insurance plan paid for by your employer:



  • If both you and your employer have paid the premiums for the plan, only the amount you receive for your disability that is due to your employer’s payments is reported as income.

  • If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive for your disability as income on your tax return.

  • If you pay the premiums of a health or accident insurance plan through a cafeteria plan, and the amount of the premium was not included as taxable income to you, the premiums are considered paid by your employer, and the disability benefits are fully taxable.

  • If the amounts are taxable, you can submit a Form W-4S

    In short if you paid them all and the payments were included in your wages then the long term disability now is not taxable.

Customer:

Yes, this is quoting the IRS statute. I paid the premium, it is not a cafeteria plan, but the premium itself was not taxed. That is my confusion.

Robin D :

Then it is not taxable to you now. If you did not have the amount you paid subtracted from your wages and the employer did not pay the premiums out of their pocket for you then you were taxed on the premiums. Even if you took the money out of your pocket and gave it to them to pay the premium, you did it with money that was already taxed. Unless the employer paid for it with their money or, they used your money but did not subtract it from the wage amount that gets listed in your Box 1 amount on your W2, it is counted as being taxed already because it was not subtracted out of your taxable wages before tax was calculated.