I did pay the premium, it was taken out of my paycheck pre-tax. I did get a 1099 from American Fidelity yesterday reporting the benefit as misc income so now I am forced to report it and will be charged taxes on the $50,000. I called American Fidelity and they said they treat this cancer insurance as a 125 so it is taxable. When I was dropped from the plan I kept my husband and daughters on it and now pay them directly with after-tax money and when I asked her if one of them were to be diagnosed would I still get a 1099 showing it as misc income she said yes, it doesn't make a difference. Even when I told her that IRS Publication 525 says that if I paid the premiums the benefit wouldn't be taxable she was insistent that it was taxable.
