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IRS NOTICE 2004-79 PDF

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Excerpt: This notice provides guidance regarding the effect of the Working Families Tax Relief Act of (WFTRA), Pub. L. No. , On November 17, , the Internal Revenue Service (“IRS”) published Notice (“Notice”), clarifying some confusion over the definition. (IRB ) Corporate distributions of property; distribution by subsidiary Notice (IRB ) Notice withdrawn; IRS to continue.

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However, the exclusion is limited to contributions made for coverage of the employee, the employee’s spouse, and the employee’s dependents. So a child may qualify as a dependent for purposes of the exclusion from gross income ifs employer-provided health insurance benefits whether or not the parent actually claims the dependency exemption for the child on the parent’s federal income tax return.

As a result of the expanded coverage required by the Massachusetts health care reform law, the child is included in the parent’s employer-provided health insurance coverage. The Massachusetts Health Urs Reform Act at chapter 58 of the Acts ofas amended, changed chapters 32A,A, B and G of the General Laws to require a broadening of dependent coverage offered by health insurance carriers. In iirs, for a child to 200479 considered a dependent under the Internal Revenue Code, the child must meet the requirements of a 2004–79 child” or a “qualifying relative” as described below.

Collectively, the amendments require that on or after January 1,carriers issuing or renewing insured health benefit plans with coverage for dependents make coverage available for persons “under 26 years of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U.

For purposes of the exclusion from gross income for employer-provided health insurance, any child of divorced parents who meets the expanded definition of dependent in connection with one parent is treated as a dependent of both parents. A noncash fringe benefit that is included in gross income is sometimes referred to as “imputed income. Skip table of contents.

As of January 1,the Massachusetts Health Care Reform Act expands employer-provided health insurance coverage to include an employee’s child “under 26 years of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U.

In Notice, C. Pursuant to IRS Noticethe definition of “dependent” for purposes of the exclusion from gross income for employer-provided health insurance benefits is broader than the definition for purposes of claiming the dependency exemption for the child on the parent’s federal income tax return. Employer-provided health insurance coverage is a fringe benefit.

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Text of IRS Notice on Definition of ‘Dependent’ in Group Health Plans (PDF)

When does an employee’s child meet the definition of dependent ies purposes of employer-provided health insurance coverage so that the entire value of the coverage is excluded from gross income? The child is supported by both his parents.

The father is a Massachusetts resident. Section 61 a 1 of the Code states that, except as otherwise provided, gross income includes compensation for services, including fees, commissions, fringe benefits, and similar items.

For federal income tax purposes, an employee who opts for coverage for a nondependent child will be taxed on the fair market value of the child’s coverage to the extent that it exceeds any amount paid by the employee on an after-tax basis employee pre-tax contributions are considered to be employer contributions.

This TIR provides a summary of Internal Revenue Service Noticea federal notice that provides relief from imputed income in many instances where employer-provided health coverage includes an employee’s grown child. Please do not include personal or contact information.

IRS Notice 2004-79 Clarifies WFTRA Confusion

Massachusetts gross income is federal gross income, as defined under the Code, with certain modifications. When does employer-provided health insurance coverage for an employee’s child result in imputed income to the employee? A fringe benefit is any property or service that an employee receives in lieu of or in addition to regular taxable wages.

Accordingly, under Internal Revenue Service Noticean employee may exclude from gross income the value of employer-provided health insurance coverage for a child who, while not a “qualifying child,” meets the definition of a “qualifying relative” determined without regard to the child’s gross income.

IRS Notice Clarifies WFTRA Confusion – Benefits Counsel

Pending specific guidance from the Internal Revenue Service, an employer must determine the amount of imputed income nltice to the health insurance coverage of an employee’s nondependent child under valuation principles articulated in federal income tax law.

The Legislature made several technical corrections to the health care reform law in the recent “Act further Regulating Health Care Access,” St. Under the terms of the divorce agreement, the mother may claim the federal dependency exemption for him. The employee’s federal gross income for the year, as reflected in his or her W-2, will be higher and this higher amount will be subject to taxation and withholding. Any notiec to whom section e applies shall be treated as a dependent of both parents for purposes of this subsection.

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The extent to which a particular fringe benefit is excluded from gross income depends on the Code provisions that apply to the benefit. However, for federal income tax purposes, the value of health insurance benefits for a child of an employee is treated as imputed income in cases where the child does not qualify as a dependent under IRC section A child of divorced parents, age 25, is a full-time student who lives with his mother. Section a of the Code provides that gross income of an employee does not include employer-provided coverage under an accident or health plan.

If an employee participates in an employer-provided health insurance plan, any amount which, but for this section, would be included in gross income of the employee by reason of coverage under the plan of any person other than the employee, to the extent such coverage is mandated by law.

An employer or an employee seeking a case-specific determination on imputed income for federal income tax purposes must contact the Internal Revenue Service.

As a result of extended employer-provided health insurance coverage for children “under 26 years of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U. If a taxpayer’s child does not meet the requirements of a dependent as a “qualifying child,” the child may still meet the requirements of a dependent as a “qualifying relative.

The recent legislation provides an exemption for imputed income for Massachusetts personal income tax purposes where health care coverage is required by Massachusetts law. Also, prior to the clarification in the technical corrections Act, the health care reform law required that on or after January 1, notiice, carriers issuing or renewing insured health benefit plans with coverage for dependents make coverage available for persons “under 26 years of age or for 2 years following loss of dependent status under the Internal Revenue Code, whichever occurs first.

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