Overview: Most employers offer several different types of employee benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans. Whether employer and employee contributions and benefit payments received by employees are subject to withholding for certain payroll taxes, such as federal income tax (FIT), Social Security and Medicare (FICA) taxes or federal unemployment (FUTA) tax, varies among benefit types.
Trends: The following important issues will affect the taxation of employee benefits in 2014!
Author: Rena Pirsos, JD, Legal Editor
The 7th Circuit Court of Appeals upheld recent lower court decisions invalidating Indiana's and Wisconsin's laws banning same-sex marriage.
The value of health insurance benefits provided to an employee's same-sex spouse or partner and/or their dependents is taxable in Indiana.
Despite the DOMA decision handed down by the Supreme Court in Windsor, state laws still vary greatly regarding both the recognition of same-sex marriage and the taxation of benefits provided to an employee's same-sex spouse by an employer. This Quick Reference Chart summarizes federal and state law regarding whether same-sex marriages, civil unions and/or domestic partnerships are recognized, and whether the value of benefits provided by an employer to an employee's same-sex spouse or civil union or domestic partner is taxable. This chart will be updated when any changes in these laws occur.
An in-depth review of the spectrum of Wisconsin employment law requirements HR must follow in respect to Taxation of Employee Benefits.
Courts in Colorado, Indiana and Virginia have held that state laws banning same-sex marriage are unconstitutional. However, each decision has been stayed and same-sex couples in these states currently cannot get married.
Employee benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans, may be subject to withholding for federal income taxes (FIT), Social Security and Medicare (FICA) taxes or federal unemployment (FUTA) taxes. This section assists HR professionals in understanding how each particular type of benefit plan must be structured and how to properly tax and report contributions, reimbursements and distributions in order to ensure compliance with the Internal Revenue Code.
To prevent identity theft, the IRS has issued final regulations permitting the use of Truncated Taxpayer Identification Numbers (TTINs) on certain federal tax-related payee statements, but not on Form W-2.
Employers are seeing significant changes when it comes to same-sex marriages and other relationships in the workplace. Several states recognize same-sex marriage and extend the same rights and benefits to both same-sex opposite-sex married couples.
The legalization of same-sex marriage potentially requires employers to provide benefits such as health care coverage and leave time to a broader range of employees, which may also have tax implications.
The FAQs provide answers to some of the most commonly asked questions about the dependent coverage requirements of the Affordable Care Act.
HR guidance on the taxation of employee benefits.