Any Income Tax experts out there?

[RandalB]

Hi all,

Quick Income Tax question for any knowledgeable person:

Is money obtained from a benefits (Medical,Dental,Etc) Cash out considered federally taxable income?

I think there's a mistake on Mrs. RandalB's W-2...

Thanks in advance for any insights...

RandalB

[Sk8r]

Benefits such as use of a company auto are counted as income.

I would not be surprised that a payout in cash would be treated as income. Is that what happened? She didn't use the plan, so got a cash payout from the company?

[RandalB]

I knew about the auto, I get taxed on mine.

She got a job with full insurance benefits (Medical,Dental,Vision,etc) and my insurance through the department is better so we kept mine. They gave her their cost of her insurance in cash. They pay it on a separate check and they don't take federal tax out on it.

I think it should be considered taxable income, but I'm not 100% and the IRS's website is no help....Her W-2 is listing it as non-taxable.

RandalB

[pnosko]

A cash out? Do you mean getting reimbursed for medical/dental expenses from a medical savings plan?

[clavery]

Money that you receive from the insurance company after you've submitted a claim is not taxable, as you paid premiums in exchange for the benefits. If the company gives you money to WAIVE coverage, that is taxable. If you take a distribution from a retirement plan before you are age 59 1/2, that is also taxable and subject to penalty taxes. Some stock cash-outs are subject to short-term or long-term gains. If you want to provide more details, I'll let you know if I know the answer (I manage my company's payroll and benefits plans, so I'm pretty familiar with taxation of benefits).

[The Grim Reefer]

Originally posted by RandalB
I knew about the auto, I get taxed on mine.

She got a job with full insurance benefits (Medical,Dental,Vision,etc) and my insurance through the department is better so we kept mine. They gave her their cost of her insurance in cash. They pay it on a separate check and they don't take federal tax out on it.

I think it should be considered taxable income, but I'm not 100% and the IRS's website is no help....Her W-2 is listing it as non-taxable.

RandalB

Don't know what the real answer is but I guarantee you what I would do if they sent me a W-2 listing it as non-taxable

[RandalB]

It's actually money that the school district would have used to pay for the benefits if she had elected to use their insurance. It's not reimbursement money for medical care.

In other words, they pay her instead of the insurance company because she doesn't use their (The school district's)medical insurance plan..

RandalB

PS: I know Grim, but I don't need a visit from the boys at the IRS...

[MandM]

Sounds taxable to me, BrianD would know. I think he's a janitor at H&R Block.

[BrianD]

It is taxable.

[batguano]

I'm not a tax expert but I did stay at a Holiday Inn Express last night!

[The Grim Reefer]

Originally posted by RandalB
It's actually money that the school district would have used to pay for the benefits if she had elected to use their insurance. It's not reimbursement money for medical care.

In other words, they pay her instead of the insurance company because she doesn't use their (The school district's)medical insurance plan..

RandalB

PS: I know Grim, but I don't need a visit from the boys at the IRS...

I would double check with her employer before I did claim it just to make sure. Maybe they were refunding money that was held out for ins. or something. Seems like a pretty blatant mistake but if they have never ran into the situation before... It isn't like employers dont make mistakes. I had one 1099 me for being reimbursed for business use of my vehicle when I was paid on a per mile basis. The IRS faxed me the stuff that explained what the rules were and the twit at my job still wouldn't change it. The IRS lady told me to just ignore the 1099 but be sure and keep my copies of the mileage reports in case it was called into question. I was nervous about it but it went through. Just lucky I guess.

[RandalB]

Thanks Guy/Gals, I will be following up on it.

RandalB

[BrianD]

If the circumstances are as you say (your wife received a check in lieu of being covered by the company group health insurance policy), the amount she receives is subject to taxation.