Hello -
Please note: this answer is not finished until you're satisfied with
it. If you require additional information/clarification, I ask that
you please request it before rating this answer. Thanks for your
understanding.
The short answer to your question is "yes." I have verified this was
a rep from the IRS.
You're only paying taxes right now on $12.19. If you start receiving
*income* from LTD benefits of hundreds of dollars, this would be like
receiving any other income which is subject to taxation. I am told
this holds true if you're under retirement age.
Additional information can be seen at this IRS website link, form 525,
pages 14-15:
http://www.irs.gov/pub/irs-pdf/p525.pdf
Search Strategy:
contacted IRS
jbf777-ga
GA Researcher |
Clarification of Answer by
jbf777-ga
on
28 Feb 2003 17:16 PST
that was meant to read, "I have verified this WITH a rep"
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Request for Answer Clarification by
brdietrich-ga
on
01 Mar 2003 15:52 PST
The issue here is whether my company pays for the benefit or I pay for
the benefit. My question was since I receive the benefit before tax,
and I pay tax on the benefit, is this an indication that I do not have
to pay tax on the distributions? I understand that if my company paid
for the benefit, which in this case it does, I have to pay tax on the
distributions. But since I am paying tax on before tax benefits, does
this rule still apply--I pay the tax on the distributions? I
understand that if I paid for the benefit, that I would not have to
pay taxes on the distributions. I think I need to talk to a CPA or
talk to the IRS directly. Thanks anyway. I understand the way this
works is that if I do not rate your answer, I don't have to pay the
$25. Is that correct?
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Clarification of Answer by
jbf777-ga
on
01 Mar 2003 17:32 PST
>My question was since I receive the benefit before tax,
>and I pay tax on the benefit, is this an indication that I do not
have
>to pay tax on the distributions?
No, this is not an indication. You have to pay tax. I've already
verified this with the IRS. Think about this for a second. You're
only paying taxes on $12.19 worth right now. Say that's $12.19 per
week, or $48.76 per month, or $585.12 per year. Say, for the sake of
easy numbers, you pay 10% tax on that. Over the course of one year,
you've paid the government $58.51. Over one year Say you start
receiving checks for $500 a week.
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Clarification of Answer by
jbf777-ga
on
01 Mar 2003 17:33 PST
Sorry about that... that was posted prematurely. Let me repost....
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Clarification of Answer by
jbf777-ga
on
01 Mar 2003 18:00 PST
No, this is not an indication. You have to pay tax. I've already
verified this with the IRS. Think about this for a second. You're
only paying taxes on $12.19 worth right now. Say that's $12.19 per
week, or $48.76 per month, or $585.12 per year. Say, for the sake of
easy numbers, you've paid 10% tax on that. Over the course of one
year,
you've paid the government $58.51. Now, let's say you start receiving
distribution checks for $500 a week over the course of the next year.
That's $500/week in INCOME in the form of distribution checks, or
$2000/month, or $24,000/year. Up until this point, you've only paid
the government $58.51 in tax [yes, I realize you're being taxed on
money that's not even yours, being put toward LTD]. But that's a VERY
small percentage of money compared to what you owe totally. Say you
subtract out that $58.51 from the $24,000 you've gotten in income
[since you've already paid that $58.51 as tax to the government].
That's $22058.51 you're receiving as INCOME from distribution checks
over the year that the government has not seen any tax from! You owe
tax on that income, just like any other kind of income.
The rating of the answer doesn't have to do with whether or not you
pay for it. Your satisfaction is guaranteed. You can request a
refund for the list price of the question. But I'm willing to work
with you until you're satisfied with this answer. Is there any more
clarification you need?
jbf777-ga
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Clarification of Answer by
jbf777-ga
on
01 Mar 2003 18:46 PST
Actually, I have read and re-read your situation after my posting. I
thought I fully understood what the situation was, but I've realized
it's a bit more convoluted. I'm going to withdraw my answer, so you
don't have to worry about any refunds. I apologize for any confusion.
Your right, the issue lies in "who's paying the benefit." Even though
the company is paying for the benefit, is it counted in "tax terms" as
YOU paying the benefit because it's coming out of YOUR paycheck since
your company has "grossed up" the check? Or is it counted as the
company paying the benefit because they're the ones cutting the check
for it?
You can contact the IRS directly about this at www.irs.gov. They
should have an answer for you.
Sorry for any inconvenience,
jbf777-ga
GA Researcher
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