For Group-Term Life Insurance and Domestic Partner Benefits
Jody Lee, Compliance Manager, Johnson & Dugan
The first $50,000 of Group-Term Life Insurance is excluded from gross income pursuant to Section 79 of the IRS Code. Any Group-Term Life Insurance coverage in excess of that amount is taxed as imputed income under Table I of the section 79 regulations. The first Table I was published in 1966 and has been subsequently revised in 1983, 1988 and 1999.
Below is the current Table I rate schedule.Under 25 $0.05
25 to 29 .06
30 to 34 .08
35 to 39 .09
40 to 44 .10
45 to 49 .15
50 to 54 .23
55 to 59 .43
60 to 64 .66
65 to 69 1.27
70 and above 2.06
(Treasury Regulations. Sec. 1.79-3
Effective: July 1, 1999
Memo Date: November 1, 2009)
Please note that the imputed income tax can be shown annually as additional income on the year-end W-2, or it can be spread out over the affected pay periods if your payroll service offers this enhancement.
Domestic Partner Imputed Income
Imputed
income must also be reported for those employees covering a domestic
partner. The employee must report any premium cost paid by the employer
on behalf of a domestic partner as imputed income for tax purposes.
For
example: If the value of the premium on a monthly basis attributable
to a domestic partner is $200, and the company charges its employees
$100 per month to enroll a partner on an after-tax basis, then the net
income to the employee for the year would be $1,200 ($200-$100 x 12)
for the whole year. This amount would be added to the employee’s W-2
at year-end.
Avoid Penalties
Under
reporting income or under withholding taxes can result in IRS penalties
to the employer, plus interest charges. An IRS payroll audit would
identify any such reporting errors.
Please contact your Johnson & Dugan Team, for additional information.
