Excerpt: This notice provides guidance regarding the effect of the Working Families Tax Relief Act of (WFTRA), Pub. L. No. , On November 17, , the Internal Revenue Service (“IRS”) published Notice (“Notice”), clarifying some confusion over the definition. (IRB ) Corporate distributions of property; distribution by subsidiary Notice (IRB ) Notice withdrawn; IRS to continue.
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For an affected employee, the Massachusetts gross income for the year, as reflected in his or her W-2, will be lower than federal gross income. Massachusetts General Laws show more show less. In Notice, C. An employer or an employee seeking a case-specific determination on imputed income for federal income tax purposes must contact the Internal Revenue Service.
Pending specific guidance from the Internal Revenue Service, an employer must determine the amount of imputed income attributable to the health insurance coverage of an employee’s nondependent child under valuation principles articulated in federal income tax law. We use your feedback to help us improve this site but we are not able to respond directly.
The extent to which a notie fringe benefit is excluded from gross income 20047-9 on the Code provisions that apply to the benefit.
The term “imputed income” is sometimes used to refer to the value of a noncash fringe benefit an employee receives where federal law requires the value of the fringe benefit to be included in the employee’s gross income.
Text of IRS Notice on Definition of ‘Dependent’ in Group Health Plans (PDF)
The gross income of an employee does not include contributions which his employer makes to an accident or health plan for compensation through insurance or otherwise notide the employee for personal injuries or sickness incurred by him, his spouse, or his dependents, as defined in section However, the exclusion is limited to contributions made for coverage of the employee, the employee’s spouse, and the employee’s dependents.
When does an employee’s child meet the definition of dependent for purposes of employer-provided health insurance coverage so that the entire value of the coverage is excluded from gross income?
As explained in TIRwhether a child of an employee is a dependent for purposes of the federal exclusion from gross income of employer-provided health insurance coverage is a question of federal income tax law pursuant to Internal Revenue Code section The recent legislation provides an exemption for imputed income for Massachusetts personal income tax purposes where health care coverage is required by Massachusetts law.
The purpose of this fact sheet is to provide general guidance on the federal and Massachusetts treatment of employer-provided health insurance coverage for an employee’s child. Accordingly, under Internal Revenue Service Noticean employee may exclude from gross income the value of employer-provided health insurance coverage for a child who, its not a “qualifying child,” meets the definition of a “qualifying relative” determined without regard to the child’s gross income.
In the context of employer-provided health insurance benefits, the following examples illustrate when imputed income occurs and when it does not. Also, prior to the clarification in the technical corrections Act, the health care reform law required that on or after January 1,carriers issuing or renewing insured health benefit plans with coverage for dependents make coverage available for persons “under 26 years of age or for 2 years following loss of dependent status under the Internal Revenue Code, whichever occurs first.
When does employer-provided health insurance coverage for an employee’s child result in imputed income to the employee? The employee’s federal gross income for the year, as reflected in his or her W-2, will be higher and this higher amount will be subject to taxation and withholding. For purposes of the exclusion from gross income for employer-provided health insurance, any child of divorced parents who meets the expanded definition of dependent in connection with one parent is treated as a dependent of both parents.
IRS Notice 2004-79 Clarifies WFTRA Confusion
As a result, Massachusetts will not follow federal law in the area of imputed income resulting from employer-provided health care fringe benefits. As a result of extended employer-provided health insurance coverage for children “under 26 years of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U. If a child does not meet the definition of dependent for these purposes, the value of the health coverage for this individual will be imputed as income to the employee for federal income tax purposes.
The child is included in the father’s employer-provided health insurance coverage.
Section a of the Code provides that gross income of an employee does not include employer-provided coverage under an accident or health notixe. The Massachusetts Health Care Reform Act at chapter 58 of the Acts ofas amended, changed chapters 32A,A, B and G of the General Laws to require a broadening of dependent coverage offered by health insurance carriers.
Massachusetts Department of Revenue Referenced Sources: A noyice fringe benefit that is included in gross income is sometimes referred to as “imputed income. However, pursuant to G. The child is supported by both his parents. Any child to noticw section e applies shall be treated as a dependent of both parents for purposes of this subsection.
Collectively, the amendments require that on or after January 1,carriers issuing or renewing insured health benefit plans with coverage for dependents make coverage available for persons “under 26 years of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U.
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So a child may qualify as a dependent for purposes of the exclusion from gross income for employer-provided health insurance benefits whether or not the parent actually claims the dependency exemption for the child on the parent’s federal income tax return. A child of divorced parents, age 25, is a full-time student who lives with his mother. A fringe benefit is any property or service that an employee receives in lieu of or in addition to regular taxable wages.
Feedback Did you find what you were looking for on this webpage? If you need to report child abuse, any other kind of abuse, or need urgent assistance, please click here. Where an employee is charged with federal imputed income for employer-provided health coverage, the employee is not charged with the imputed income for Massachusetts purposes where the health care coverage is required by state law.
In the area of employer-provided health insurance coverage which is a fringe benefitthe value of health insurance benefits for a child of an employee is excluded from gross income where the child is a dependent under the rules of IRC section