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re: Underpayment penalty on taxes......Paging Poodle...please see last post
Posted on 4/2/13 at 5:03 pm to PurpleAndGold86
Posted on 4/2/13 at 5:03 pm to PurpleAndGold86
Here are some blurbs from articles if you are interested:
Every article I have seen says the exact same thing.
quote:From Sovereign Bank
Will Your Disability Benefits Be Taxable?
Both short- and long-term disability benefits are taxable to varying degrees, depending on the type of policy. Here are the rules under current law:
Your short-term disability benefits are taxable or tax-free depending upon how the plan premiums are paid. States with statutory short-term disability plans have special rules.
The portion of LTD benefits you receive that is paid by an employer is taxable to you. Federal, state, and local taxes are withheld; Social Security and unemployment taxes are excluded.
The portion of LTD benefits you receive that is paid by you is tax-free, except if you pay with pre-tax dollars.
quote:From Turbotax
However, short-term disability payments received under an insurance policy are not exempt, though you may not be liable for additional taxes on such payments if you have already borne the cost of taxation through the structure of the plan.
quote:From Bankrate
Disability income is taxable when your employer has paid the premiums and the premiums have been excluded from your earnings. As a general rule, an employer generally excludes disability premiums from an employee's earnings.
Every article I have seen says the exact same thing.
Posted on 4/2/13 at 5:10 pm to PurpleAndGold86
All underpayment penatlies are based on the previous years tax liability. You have to have 110% of last years liability paid in the current year through either withholdings or estimates.
So the disability payment has no berring on your underpayment. More likely you changed your withholding to pay in less, that you thought would be compensated by the addtion of the girls, congrat by the way, but the disability payment raised you AGI to cancel out the extra dependents.
So the disability payment has no berring on your underpayment. More likely you changed your withholding to pay in less, that you thought would be compensated by the addtion of the girls, congrat by the way, but the disability payment raised you AGI to cancel out the extra dependents.
Posted on 4/2/13 at 6:07 pm to PurpleAndGold86
quote:
PurpleAndGold86
you gave a lot of quotes, but I feel the need to simplify the information for the OP (I do this for a living, not trying to be a dick )
Whether benefits are taxable depends upon how the insurance premium was paid:
1.)Employer Funded - proportional taxation-Short term disability income is taxable if your employer shares in the cost of your disability premium. Many group disability programs operate in this manner, and many employers elect to provide disability insurance as a paid company entitlement. Make sure you understand if your employer is paying a portion of your premium.
Your disability income will be taxable proportionately to the premium paid by your employer, and the portion paid by you using after tax payroll deductions.
2.)Before Tax - premiums paid by employee, with pre-tax income.generates savings on the premium However, the benefits are 100% taxable. Which is why an honest insurance agent won't include short term disability policy in electable pre-tax deductions.
3.)After Tax - ideal for pregnancy and maternity leave premiums payed by employee with after tax money, benefits are 100% tax free
4.) Combined Funding - common with some state disability programsAre state short term disability claims payments taxable? Only five states have a disability program in place and the answer differs for each state as the manner in which premiums are paid differ.
Yes, it's a long answer. But to simplify it, if your wife paid the premiums with after tax money, the benefits aren't taxable. If she paid with pre-tax money, they are taxable. If the employer paid 100% of the premium, they are generally taxable. If you shared the premium costs, they are proportionally taxable.
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