@dmertz wrote:
With $352/month inappropriately taken out of the pay for health insurance and no correction made by the employer, the W-2 will show lower amounts in boxes 1, 2, 3 and 5 than would otherwise be the case.
That's not the only thing that happened.
In fact, two things should have happened.
First, the employee share of the premiums for the domestic partner would have been deducted after-tax instead of pre-tax. However, and probably more importantly, the employer share of the premiums for the DP would have been added to the employee's income as wages as imputed income, and been subject to federal, state and employment tax withholding.
How that would look on a weekly basis is harder to calculate and explain. But when it gets to the W-2 stage, the net result would something like this:
Assume the contracted wages were $50,000 per year. The employer share of premiums was $1000 per month ($500 for employee and $500 for partner), and the employee share was $500 ($250 for self and $250 for partner) per month. The imputed wages are included for 6 months (July-December).
Under the correct calculation (the spouse is treated as a spouse),
| Box 1 wages |
$47,000 |
Box 2 fed w/h |
$5000 |
| Box 3 SS wages |
$47,000 |
Box 4 SS w/h |
$2914 |
| Box 5 medicare wages |
$47,000 |
Box 6 Medicare w/h |
$681 |
This is because the employer premium is not imputed income and the employee premium is deductible.
Under the imputed income calculation, the W-2 should look something like this
| Box 1 wages |
$51,500 |
Box 2 fed w/h |
$5200 |
| Box 3 SS wages |
$51,500 |
Box 4 SS w/h |
$3193 |
| Box 5 medicare wages |
$51,500 |
Box 6 Medicare w/h |
$746 |
The wages are higher because only the self-premium is deductible ($250/month, $1500 for the 6 months) and the employer premium is taxable imputed income ($500/month, $3000 for the 6 months). In addition to this the other $250 employee share for the partner was taken out after tax, not before.
The insurance company got their $1500 per month either way, the issue is how it was taxed and deducted (or not) to the employee.
The employer can correct the W-2 to reflect that the extra employee share should have been pre-tax, and the employer share should not have been imputed income. The W-2 withholding does not have to be refunded (because the taxpayer would get that back as their tax refund) but the employer should refund the corrected SS and Medicare withholding. Like I said, it's permissible for the employer to do this and the calculation (and the procedure to adjust the SS and medicare withholding) are all possible, if they wanted to put in the effort.
I'm not sure how you determined that $352/month was taken out inappropriately. The employee share of the spouse premium would have to be paid anyway, it just would have come out before tax instead of after tax. There was extra tax withholding (due to the imputed income and lack of tax deduction for the spouse premium), but whether that extra withholding accounts for the entire $352 would require a much more detailed analysis of the entire situation.
