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Dear Dr., I'm doing my income tax return for 2017. I’m

Dear Dr. Chen, I'm doing my...
Dear Dr. Chen,
I'm doing my income tax return for 2017. I’m currently working on the personal income.
In gleaning information on the web I found the following:
Disability income from a disability-insurance policy is taxable depending on how the premiums were paid: You can exclude income from long-term or short-term disability benefits from a disability policy you bought yourself with after-tax dollars.You received from an employer plan paid with after-tax dollars. You must have chosen to have the coverage paid by your employer with after-tax dollars before the beginning of the plan year. You must include income from long-term or short-term disability benefits whose coverage your employer paid using pre-tax dollars for the plan year when you became disabled.”
My question: All the above verbiage makes sense until the last three lines which seems to contradict what's above it. My question is: Do I pay taxes if my only income in 2017 came from short- and long-term disabilities that were sponsored by the company I worked for. Short-term was paid for by employer, and I opted to pay small fee that was taken out of my check for I believe a 10% additional amount of STD income should I need the short-term disability income plan. Later during the year I qualified for long-term disability and received back-pay plus regular LTD income. I also had opted to pay for the LTD plan which was taken out of my check. In sum, all personal income for 2017 was from STD and later LTD. Do I calculate taxes owed on these two incomes (STD/LTD) just like any other 1040? According to the STD W-2 statement fed inc tax $ was withheld, social sec tax $ was w/h, medicare tax $ was w/h. Do I plug these withheld amounts into the 1040 like any other 1040?Thank you very much.
Gordon Leith
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Answered in 1 hour by:
3/8/2018
emc011075
emc011075, Tax adviser
Category: Tax
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Hi. My name is ***** ***** I will be happy to help you.

How was the premium paid? Pre or after tax? Was the LTD or STD plan part of the employer sponsored cafeteria plan? When you say 10% was taken out of your paycheck, do you mean disability paycheck or regular paycheck before you became disabled?

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Customer reply replied 4 months ago
Any of the premiums I paid into STD or LTD would have been paid in 2016 because I was already absent/unemployed from work in all of 2017. Every employee was provided STD plan at no cost, but I elected to pay a small amount per paycheck for greater payout (66% vs. 50% of income) should I need to use the STD plan. But money taken out of my paycheck for that negligible premium for the added value to STD was non-existent in 2017. LTD plan premium was paid entirely by the employee. You could elect for greater payout when/if LTD plan was used by paying for the greatest tier of LTD plan by having money taken out of paycheck. 10% was not taken out of my paycheck. 10% was the added payout value of the LTD I elected for. Thank you. Gordon

Yes, the additional percentage is optional but still paid through the cafeteria plan, generally on after-tax basis. Anything paid through sec 125 aka cafeteria plans are treated as paid by employer. Just like contributions to HSA, even though it the amount is taken out of your paycheck, it is still treated as paid by employer through his plan.

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Customer reply replied 4 months ago
Do I calculate taxes owed on these two incomes (STD/LTD) just like any other 1040? According to the STD W-2 statement fed inc tax $ was withheld, social sec tax $ was w/h, medicare tax $ was w/h. Do I plug these withheld amounts into the 1040 like any other 1040?

Yes, you enter it just like any other W2. Any STD/LTD are subject to social security and Medicare withholding for the first 6 month.

emc011075
emc011075, Tax adviser
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