APRIL 2002 QUESTION OF THE
MONTH
Q.
We
pay for the first $50,000 in group life insurance for our
employees and then allow them to purchase, on a pre-tax basis,
up to a $100,000 more. How do we treat their pre-tax purchase
when figuring their imputed income?
A. If
additional life insurance is purchased using after-tax dollars,
these after-tax amounts are subtracted from the calculated
imputed income figure before being added to the employee's
income. But the IRS considers life insurance purchased by
employee pre-tax dollars as actually being paid for by the
employer. So, in this case, the entire calculated imputed
income figure is added to the employee's income.
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