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re: Underpayment penalty on taxes......Paging Poodle...please see last post
Posted on 4/2/13 at 6:07 pm to PurpleAndGold86
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.
Posted on 4/2/13 at 6:37 pm to Vols&Shaft83
If you do this for a living, I would probably go back and edit your prior post claiming that short term disability benefits are not taxable because it is incorrect information especially the 66% info you gave. The determining factor in whether or not the benefits are taxable is how the premiums were paid.
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