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 (IRB ) Corporate distributions of property; distribution by subsidiary Notice (IRB ) Notice withdrawn; IRS to continue.
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Generally, with respect to the personal income tax, Massachusetts adopts the Code as amended and in effect on January 1, Section a of the Code provides that gross income of an employee does not include employer-provided coverage under an accident or health plan.
If an employee participates in an employer-provided health insurance plan, any amount which, but for this section, would be included in gross income of the employee by reason of coverage under the plan of any person other than the employee, to the extent such coverage is mandated by law. Massachusetts Department of Revenue Referenced Sources: 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” or a “qualifying relative” as described below.
However, the exclusion is limited to contributions made for coverage of the employee, the employee’s spouse, and the employee’s dependents. As a result, Massachusetts will not follow federal law in the area of imputed income resulting from employer-provided health care fringe benefits.
If you need to report child abuse, any other kind of abuse, or need urgent assistance, please click here. When does employer-provided health insurance coverage for an employee’s child result in imputed income to the employee? Feedback Did you find what you were looking for on this webpage? The employee’s federal gross income for the year, as reflected in his or her W-2, noticee be higher and this higher amount will be subject to taxation and withholding.
In Notice, C. 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 noice on the parent’s federal income tax return.
In the context of employer-provided health insurance benefits, the following examples illustrate when imputed income occurs and when it does not.
IRS Notice 2004-79 Clarifies WFTRA Confusion
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. The extent to which a particular fringe benefit is excluded from gross income depends on the Code provisions that apply to the benefit. 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.
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. A child of divorced parents, age 25, is a full-time student who lives with his mother.
A noncash fringe benefit that is included in gross income is sometimes referred to as “imputed income. An employer or an employee seeking a case-specific determination on imputed income for federal income tax purposes must contact the Internal Revenue Service. 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. As of January 1,the Massachusetts Health Care Reform Act expands employer-provided ntice insurance coverage to include an employee’s child “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.
This can happen, for example, when the child is over age ntoice or is emancipated. Jotice 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 child is included in the father’s employer-provided health insurance coverage. Under federal tax law, employer contributions for notiice insurance are excluded from an employee’s gross income.
If a taxpayer’s child does not meet the requirements of a dependent as a “qualifying child,” the child may still meet the requirements of a dependent as a “qualifying relative. 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.
Employer-provided health insurance coverage is a fringe benefit. Any child to whom section e applies shall be treated as a dependent of both parents for purposes of this subsection.
IRS Notice Clarifies WFTRA Confusion – Benefits Counsel
This TIR focuses on the instances where a child of a taxpayer who is not a “qualifying child” may be a “qualifying relative. Section 61 a 1 of the Code states that, except as otherwise provided, gross income includes compensation for services, including fees, commissions, fringe benefits, and similar items. 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.
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 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.