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 (IRB ) Corporate distributions of property; distribution by subsidiary Notice (IRB ) Notice withdrawn; IRS to continue.
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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.
Massachusetts Department of Revenue Referenced Sources: For federal income tax purposes, an employee who opts for coverage for a nondependent child will be taxed on the fair market value of the child’s coverage to the extent that it exceeds any amount paid by the employee on an after-tax basis employee pre-tax contributions are considered to be employer contributions.
However, pursuant to G. 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 Clarifies WFTRA Confusion – Benefits Counsel
Under federal tax law, employer contributions for health insurance are excluded from an employee’s gross income. The Legislature made several technical corrections to the health care reform law in the recent “Act further Regulating Health Care Access,” St. A child of divorced parents, age 25, is a full-time student who lives with his mother. Feedback Did you find what you were looking for on this webpage? The child is included in the father’s employer-provided health insurance coverage.
When does employer-provided health insurance coverage for an employee’s 2004-799 result in imputed income to the employee? We use notide feedback to help us improve this site but we are not able to respond directly.
However, the exclusion is limited to contributions made for coverage of the employee, the employee’s spouse, and the employee’s dependents. However, for federal income tax purposes, the value of health insurance benefits for a child of an employee is treated as imputed income in cases where the child does not qualify as a dependent under IRC section If you need to report child abuse, any other kind of abuse, or need urgent assistance, please click here.
IRS Notice 2004-79 Clarifies WFTRA Confusion
In Notice, C. 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.
As a result, Massachusetts will not 2004-9 federal law in the area of imputed income resulting from employer-provided health care fringe benefits. Pursuant to IRS Noticethe definition of “dependent” for purposes of the exclusion from gross income for employer-provided health insurance benefits is broader than the definition for purposes of botice the dependency exemption for the child on the parent’s federal income tax return. This can happen, for example, when the child is over age 24 or is emancipated.
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. 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.
In the context of employer-provided health insurance benefits, the following ire illustrate when imputed income occurs and when it does not. 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.
Any child to whom section e applies shall be treated as a dependent of both parents for purposes of this subsection.
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 to the employee for personal injuries or sickness incurred by him, his spouse, or his dependents, as defined in section Under the terms of the divorce agreement, the mother may claim the federal dependency exemption for him.
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. Recent legislation provides for the exclusion from Massachusetts gross income of any imputed income resulting from employer-provided health insurance of a person included in the employee’s family health insurance plan where the coverage is required by state law.
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.
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?
Massachusetts General Laws show more show less. Except in the case of amounts attributable to and not in excess of deductions allowed under section relating to medical, etc. 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.
Text of IRS Notice on Definition of ‘Dependent’ in Group Health Plans (PDF)
Section 61 20004-79 1 of the Code states that, except as otherwise provided, gross income includes compensation for services, including fees, commissions, fringe benefits, and similar items.
As a result of the expanded coverage required by the Massachusetts health care reform law, the child is included in the parent’s employer-provided health insurance coverage.
A fringe benefit is any property or service that an employee receives in lieu of or in addition to regular taxable wages.
In general, for a child to be considered a dependent under the Internal Revenue Code, the child must meet the requirements of a “qualifying child” 22004-79 a “qualifying relative” as described below.