taxable group-term life question

MrCreosote

My friend just learned that group-term life above 50K is taxable income. (as per Grandfathered Employees... below ) His company has never reported it as such even though they have had the policy for years. He said that none of his former employers did that either and wonders how many companies actually do it correctly.

How many years has that been considered taxable income? Do you think he needs to go back and make corrections or just do it correctly going forward? He is with a small company.

Down_the_Middle

You've not provided enough information to offer a meaningful response. I'd suggest the employer check with their local accountant or legal counsel to better understand their obligations. This dilemma is an IRS issue and while probably not a catastrophic matter certainly cannot be treated lightly.

NaeNae55

I agree with DTM. Seek professional help.

I can't say how long this has been law, but I know it was law when we first allowed a life insurance benefit of over $50,000 in 1991 or 1992. As we didn't allow life insurance to be over $50,000 for at least 5 years before that, I would guess it has to have been law for at least 15 years.

Good luck!

Pearce

The IRS Publication 15-B can provide a wealth of information on taxability of fringe benefits, including group term life insurance provided and paid for by the company. You can download this publication from the IRS web site.