Hello obrienrj,
Imputed income in this instance refers to the employer paid portion of the domestic partner medical coverage. If you
add a dependent to your health insurance coverage who does not qualify as a tax
dependent under the Internal Revenue Code Section 152 and Notice 2010-38, the Fair
Market Value (FMV) of the employer contribution toward that coverage is
considered a taxable fringe benefit, subject to tax withholding. This
calculated fringe benefit is known as imputed income.
This fringe benefit will increase your taxable income. Therefore, your federal,
State, Social Security and Medicare taxes may increase and your net
pay will decrease. You are not paying taxes on the same monies twice. Your employer is just accounting for the benefit you are receiving from them as "income" to you.
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For example: Let's say your normal weekly Gross Pay is $1,000 and your Net Pay after all deductions is $700.
1. Normal Gross Pay $1,000
2. Non-taxed Deductions: $100
3. Total Taxable Income: Line 1 -minus- Line 2 => $900
4. Value of Employer Paid Insurance for Domestic Partner: $75
5. Total NEW Taxable Income: Line 3 + Line 4 => $975
6. Taxes: $210
7. After Tax Insurance Deduction: $75 (Insurance Premium for DP)
8. Net Pay: Line 5 -minus- Line 6 -minus- Line 7 => $690 (The decreased net pay is due to additional tax owed on the value of the insurance premium.
Your taxes are calculated aainst your Actual Wages (what you are used to seeing) PLUS the Value of the insurance your employer pays on your behalf.
As you can see, you are not being doubletaxed, you are just being taxed on your regular wages and the additional benefit you are now receiving.
The above example is generic and is not meant to account for any specific W-2 scenario.
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Consult IRS Publication 501 and IRS Notice 2010-38 for tax dependent guidelines and tests
Hope this resolves your question.
Thank you so much for choosing TurboTax. Have a wonderful day!
