employer paying value of insurance to employee

[patriciaeastbay]

What is the name of your state (only U.S. law)? California

In California. Employer is paying the value of health insurance plan directly to employee because she has opted out since she is on husband's insurance plan.
Is there a problem with doing this? Any payroll issues? Thanks!

 

[Zigner]

If they are being paid as additional wages, and taxed as such, I see no problem.

 

[patriciaeastbay]

They are not being paid additional wages. A check is written for the value of the health insurance directly to them and not run through payroll.

 

[Zigner]

They are not being paid additional wages. A check is written for the value of the health insurance directly to them and not run through payroll.

Who are you in the situation?

 

[patriciaeastbay]

why? Would the answer be different depending on who I am? I'm the bookkeeper and the boss has asked me to investigate.

 

[Zigner]

why? Would the answer be different depending on who I am?

Yes, my answer would be different depending on who you are.

I'm the bookkeeper and the boss has asked me to investigate.

Again, so long as the income is properly reported and taxed at the end of the year, I see no problem. I am willing to venture that a 1099 at the end of the year would suffice in this situation. However, I would recommend that you consult with a local CPA and/or employment attorney on this matter.

 

[pattytx]

Actually, the withholding must be made at the time the payment is made. This is cash, not a fringe benefit in kind.

A 1099 is incorrect. This is merely additional cash earnings related to employment; the employee can use it for whatever he wants.

Read IRS publication 15 and 15-B.

 

[Zigner]

Actually, the withholding must be made at the time the payment is made. This is cash, not a fringe benefit in kind.

A 1099 is incorrect. This is merely additional cash earnings related to employment; the employee can use it for whatever he wants.

Read IRS publication 15 and 15-B.

Thanks for the clarification Patty.

 

[patriciaeastbay]

So, just to clarify. If an employer pays for a health insurance plan, like a group plan that includes the employee, it is not a taxable benefit, but if the employer pays the value of the premium directly to the employee it is taxable?
Thanks.

 

[CourtClerk]

What is the name of your state (only U.S. law)? California

In California. Employer is paying the value of health insurance plan directly to employee because she has opted out since she is on husband's insurance plan.
Is there a problem with doing this? Any payroll issues? Thanks!

Uhhh... my job (you know those big ole courts you see?) do it. If you opt out of insurance because you're covered elsewhere, you get a little spending money in your paycheck.

 

[patriciaeastbay]

And yes, I have read 15-B, it talks about the health plan paid directly, but not when the value is paid to the employee. But it makes sense that she can use it for whatever, and therefore would be taxable. I think that is what you are saying.....
a bit clearer now, thanks.

 

[pattytx]

Cash is cash and cash is always taxable.

Payroll 101.