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Imputed Income - My employer overstated the imputed income. What can I do?

At the beginning of 2019, I added my domestic partner to my health plan. In July 2019, my partner started to work for the same employer and enrolled in the health insurance plan and obtained his own member number.  Essentially, he was under two member numbers.  Later in September we married but we did not report this qualifying event within the 60 day period.  Now my employer added the whole year's worth of imputed income (health insurance) when he was under his own member number. They should have only increased my gross wages by 1/2 year worth of imputed income.  They are not only overstating my income but they will also overstate their deductions when they file their corporate tax return.  Social Security and Medicare was not affected because they added the whole year worth of imputed tax at the end of the year and did not adjust SSN or Medicare. I know the insurance company must have or could refund them the 1/2 worth of premium as a DOM Part., because they had the my spouse listed twice under two different member numbers.  How can I have them correct my W2, they are not receptive about the issue?  Or can take the difference as a deduction on taxes and explain error to IRS?

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Accepted Solutions
DawnC
Employee Tax Expert

Imputed Income - My employer overstated the imputed income. What can I do?

The W-2 correction has to be handled through your employer.   The enrollment rules and process for adding and removing dependents/spouses are different for each health plan and your HR department should be able to explain the process of enrollment and premium billing for your situation.  

 

If they are not receptive to the idea of refunding premiums and reissuing your W-2, you can take a tax deduction for the amount of imputed income that was for health insurance.   For amounts that were deducted pre-tax, you can't take the deduction as you already received a tax benefit for those funds.  However, any amounts deducted post-tax are deductible medical expenses.  Also, medical deductions are itemized deductions, so if you take the standard deduction, you will see no benefit from deducting the post-tax payroll deductions.  

 

You can only deduct the premiums if your employer included them in Box 1 (Gross Wages) of your W-2. This is highly unusual and contrary to the standard practice but a common practice in the case of imputed income for domestic partners. 

 

Medical, dental, and vision expenses are reported on Schedule A and entered in the Deductions & Credits section.

  1. With your return open, search for Schedule A and then select the Jump to link in the search results.
  2. Answer Yes on the Did you have any medical expenses in 2019? screen.
  3. Enter your medical expenses, starting with prescriptions, on the following screens.

Related Information:

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1 Reply
DawnC
Employee Tax Expert

Imputed Income - My employer overstated the imputed income. What can I do?

The W-2 correction has to be handled through your employer.   The enrollment rules and process for adding and removing dependents/spouses are different for each health plan and your HR department should be able to explain the process of enrollment and premium billing for your situation.  

 

If they are not receptive to the idea of refunding premiums and reissuing your W-2, you can take a tax deduction for the amount of imputed income that was for health insurance.   For amounts that were deducted pre-tax, you can't take the deduction as you already received a tax benefit for those funds.  However, any amounts deducted post-tax are deductible medical expenses.  Also, medical deductions are itemized deductions, so if you take the standard deduction, you will see no benefit from deducting the post-tax payroll deductions.  

 

You can only deduct the premiums if your employer included them in Box 1 (Gross Wages) of your W-2. This is highly unusual and contrary to the standard practice but a common practice in the case of imputed income for domestic partners. 

 

Medical, dental, and vision expenses are reported on Schedule A and entered in the Deductions & Credits section.

  1. With your return open, search for Schedule A and then select the Jump to link in the search results.
  2. Answer Yes on the Did you have any medical expenses in 2019? screen.
  3. Enter your medical expenses, starting with prescriptions, on the following screens.

Related Information:

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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