Retiree W-2

[cebner]

My husband received a W-2 this year for the value of his life insurance over $50,000.  In box 12 there are codes M and N for the Fica and Medicare that was NOT paid on this income.  Turbo Tax told us that we should expect a corrected W2, but I don't believe that's true.  Do we need to report/pay this amount?  If so, is there a form that we need to complete?  Will Turbo Tax generate it?

To clarify:

My husband still has an active life insurance policy with his old employer.

He is being taxed on the value of said policy for amount insured over $50,000.

It's a taxable benefit, the policy was not forfeited and this is not a surrender value.

Do we need to pay the deferred FICA and  Medicare under the box 12 codes M and N, is the question.

[LeonardS]

Yes, you should receive a corrected W-2 reporting only the taxable portion for the value of your husband's life insurance policy.  Box 12 codes M and N are used to report the uncollected FICA and medicare tax on employer-paid life insurance policies.

The amount of your husband's life insurance surrender payout that is taxed as income depends on the premiums he paid into the policy.  The total of premiums he paid into the policy is known as the cash basis. When he surrendered the policy, the amount of the cash basis is considered a tax-free return of principal. Only the amount you receive over the cash basis will be taxed.