PAYSTUBSMAKR.COM bringing you more about Insurance, Payroll, and Taxation.
In a court case called Howard Johnson, 74 T.C. No. 96 (1980), a split-dollar plan was used to ensure the life of a shareholder-employee. However, the taxable term cost charges had to pay taxes to the shareholder as dividends. The money from the split-dollar policy was supposed to go to an irrevocable trust to benefit the insured wife and other family members. The court decided that a taxable dividend was necessary because the corporation’s records did not show that additional compensation was intended.
Business Travel Accident Insurance
This kind of policy provides life insurance if the executive is dismembered or killed accidentally while traveling on company business. Premiums paid by the employer for such coverage are deductible if the amounts paid to qualify as ordinary and necessary expenses of the employer’s trade or business under §162. Regulation §1.162-10(a) provided that an employer may deduct amounts paid or accrued during the taxable year for sickness, hospitalization, surgical, medical, or accident benefits plan covering its employees, and it appears to be sufficiently broad to cover travel accident insurance.
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Medical & Dental Insurance
Employer-paid health or medical insurance plans are so commonplace for all employees, including the highly compensated, that little thought is given to their tax implications. Such plans provide a substantial economic and tax benefit to the employee and must not be overlooked when developing a fringe benefit package for the highly compensated. Best Dental Insurance Companies
The employer deductibles the premiums and are excluded from the employee’s income (§106 and Reg. §1.106-1). This is an exception to the general rule of taxation contained in §105(a). The exclusion under §106 for health insurance premium payments has been, unlike many other exclusionary provisions of the Code, rather generously interpreted by the IRS.
Disability Income Insurance
Many employers provide disability income plans for their employees, which protect their income if their physical condition prevents them from working. Employees can exclude employer-provided coverage for personal injuries and sickness, including those of their spouse or dependants (§106), from their gross income. However, the exclusion for employer-provided medical expense reimbursements does not apply to the amount that the employee would receive even if they didn’t have any medical expenses. If an employee is entitled to wages during an absence from work due to sickness or injury under a wage continuation plan, those wages are taxable even if the employee incurred medical expenses during the period of illness (Reg. §1.105-2).
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