Is Group Term Life Insurance over $50,000 taxable in PA?

[User1001]

In TurboTax Deluxe when filling out State Taxes for Pennsylvania there is a screen that says "Any Special Pennsylvania W-2 Situations." One choice that applies to me is "The Medicare wages in Box 5 on your Form W-2 are greater than your PA wages in Box 16."  The next screen in Turbo Tax says I have to send in my W2 form and explain why this case is true.  On my W2, Line 5  (Medicare Wages) is greater than Line 16 (State Wages) by the amount shown for letter C in Line 12a. Letter C represents Taxable costs of group-term life insurance over $50,000. Does this mean that my Medicare Wages are higher than state wages because Group Term Life Insurance is taxable for Medicare Wages but not taxable for PA State Wages and is this what I would explain for an additional information statement in Turbo Tax?

[ErnieS0 · Accepted solution]

Yes. Employer-paid group term life insurance premiums are not subject to Pennsylvania personal income tax. That is what you should explain on your statement.

PA says an actual state copy or a legible photocopy of each state copy of Form W-2 and/or a written explanation of the amount of compensation reported should be submitted with the PA-40, Personal Income Tax Return, if the Medicare wages in Box 5 on Form W-2 are greater than PA wages in Box 16. In this case, complete and include the PA-40 W-2 Reconciliation Worksheet with the PA-40, Personal Income Tax Return.

Refer to Can you give me some examples of items that are not subject to the personal income tax?

[User1001]

Thanks a lot for the help ErnieS0!

[Trent19]

I have a similar situation for PA state tax. But the difference between Medicare wages (box 5) and state wages (box 16) includes employer paid short-term disability, and long-term disability insurance premiums, in addition to life insurance premiums over $50K.

Are employer paid STD and LTD insurance benefits non-taxable for PA? 

The Life Insurance premium is reported on my W2 in box 12 with code 'C'. However, STD and LTD benefit amounts are not reported on form W2; my employer reports the amounts on the payslip. 

[DianeW777]

Pennsylvania (PA) wages often differ from federal wages because this state does not allow deferred compensation.

• Employer paid group term life insurance is never taxable as compensation for PA (should not be included in the state wage box).

PA does not specifically list short-term disability or long-term disability insurance payments as excluded.  Click here for a list.

This means that those payments would be included in your PA state wages.

[beansprout67]

Is this something I can do in the download version of Turbotax deluxe, PA-40 W-2 Reconciliation Worksheet?

[BillM223]

What specifically were you looking to do with the download version? Alter some field somewhere?

The answer is a tentative YES, since that is one purpose of using the download version of TurboTax. NOTE: some fields can't be changed this way (which is why I ask for which field in particular), and also it can happen that making an override can make it not possible to e-file a return.

@beansprout67

[beansprout67]

This is my problem...

In TurboTax Deluxe when filling out State Taxes for Pennsylvania there is a screen that says "Any Special Pennsylvania W-2 Situations."
One choice that applies to me is "The Medicare wages in Box 5 on your Form W-2 are greater than your PA wages in Box 16." 
The next screen in Turbo Tax says I have to send in my W2 form and explain why this case is true.

This is because employer paid group life insurance is not taxable in PA.(discussed earlier in thread). A previous poster said I needed to fill out and include the PA-40 W-2 Reconciliation Worksheet with the PA-40, Personal Income Tax Return.

Is that form even available in TurboTax? Thanks.

[JohnW152]

No, PA W-2 Reconciliation Worksheet (PA-40 W-2 RW) isn’t included with TurboTax, but you can print it from the link in this paragraph.

According to PA-40 W-2 RW, Reconciliation Worksheet in the PA-40IN Instructions, the W-2 Reconciliation Worksheet must be attached to your state return.  And since the form can’t be filed electronically, this means you’ll need to file your return on paper.  

See ORIGINAL AND AMENDED RETURN MAILING INSTRUCTIONS on page 25 of the instructions in the link above for guidance on mailing your return.

@beansprout67