IRS NOTICE 2004-79 PDF
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 (IRB ) Corporate distributions of property; distribution by subsidiary Notice (IRB ) Notice withdrawn; IRS to continue.
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Skip table of contents. The child is supported by both his parents. Employer-provided health insurance coverage is a fringe benefit. 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. 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? 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.
Please do not include personal or contact information. An employer or an employee seeking a case-specific determination on imputed income for federal income tax purposes must contact the Internal Revenue Service.
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. 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 However, the exclusion is limited to contributions made for coverage of the employee, the employee’s spouse, and the employee’s dependents.
The recent legislation provides an exemption for imputed income for Massachusetts personal income tax purposes where health care coverage is required by Massachusetts 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. A noncash fringe benefit that is included in gross income is sometimes referred to as “imputed income. 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.
The exclusion from Massachusetts gross income under G. Also, prior to the notiice in the technical corrections Act, the health care reform law required that on or after January 1,carriers 200-479 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, ids occurs first.
The notiice to which a particular fringe benefit is excluded from gross income depends on the Code provisions that apply to the benefit. In the context of employer-provided health insurance benefits, the following examples illustrate when imputed income occurs and when it does not.
Any child to whom section e applies shall be treated as a dependent of both parents for purposes of this subsection. Section a of the Code provides that gross income of an employee does not include employer-provided coverage under an accident or health plan. 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.
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Except in the case of amounts attributable to and not in excess of deductions allowed under section relating to medical, etc. 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 claiming the dependency exemption for the child on the parent’s federal income tax return. If you need a response, please locate the contact information elsewhere on this page or in the footer.
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. Although this TIR provides general guidance, an employer or an employee seeking a case-specific determination on federal imputed income must contact the Internal Revenue Service.
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.
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. 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.
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. Massachusetts Department of Revenue Referenced Sources: When does employer-provided health insurance coverage for an employee’s child result in imputed income 200-479 the employee?
IRS Notice 2004-79 Clarifies WFTRA Confusion
As of January 1,the Massachusetts Health Care Reform Act expands employer-provided health 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.
Massachusetts gross income is federal gross income, as defined under the Code, with certain modifications. Although generally Massachusetts follows federal law in the area of noncash fringe benefits, in the case of imputed income with nptice to employer-provided health insurance, the Legislature has chosen to depart from the federal treatment.
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. Accordingly, under Internal Revenue Service Noticean employee may exclude from gross income the value of employer-provided health insurance coverage for a child who, while not a “qualifying child,” meets the definition of a “qualifying relative” determined without regard notive the child’s gross income.
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 notic.
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.
In the area of employer-provided health insurance coverage which is a fringe benefitthe value of health insurance benefits for a child of an employee is excluded from gross income where the child is a dependent under the rules of IRC section However, pursuant to G. Massachusetts Department of Revenue.
This TIR focuses on the instances where a child of a taxpayer who is not a “qualifying child” may be a “qualifying relative. As a result of extended noticce 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.
IRS Notice Clarifies WFTRA Confusion – Benefits Counsel
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. This TIR provides a summary of Internal Revenue Service Noticea federal notice that provides relief from imputed income in many instances where employer-provided health coverage includes an employee’s grown child.
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. 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.
The child is included in the father’s employer-provided health insurance coverage.