Your Tax Question - 042

Dear John, I heard that my employer would begin figuring the cost of my insurance premiums so that the IRS can tax me on that benefit as part of my salary. Grrrrr, this just fries me!!! How can the IRS charge my "fringe-benefit" as part of my salary? Frustrated, Sue

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Hi Sue,

Yes, your W-2 form for 2010 is required by The Affordable Care Act (May 23, 2010) to include the amount that your employer paid for your insurance benefits. However, you will not be paying taxes on this amount for it is supposed to be for information only.

The reason that our fringe benefits are presently not taxed as income is because of the grace of Congress. Congress allowed that perk in order to encourage companies to provide health coverage to its employees. If Congress ever wants to change its mind (for whatever reason) the IRS is only ever just one vote from collecting taxes on your fringe benefits. The frustration we feel about this is because we have never thought about insurance premiums that our companies pay for our insurance as taxable income - when it in reality it always has been.

Take care,

John