Both before my long-term disability began and recently, my company advised that any benefits paid out are considered non-taxable. I originally asked given no taxes were deducted from my benefits. However, I began completing my taxes on TurboTax yesterday and was unpleasantly surprised with a substantial liability for both federal and state. I followed up with my company again this morning and was told again that benefits are indeed not taxable given I paid premiums with after-tax funds. Would my LTD benefits really be considered not taxable? If this is accurate, somehow TurboTax Deluxe is not recognizing this. Am I supposed to simply exclude the related W-2 and view it simply as records? Shouldn’t Deluxe recognize this based on LTD W-2 entries?
No, you don't need a different version of TurboTax and you definitely should not leave off the W-2 form.
Whether or not your disability pay is taxed in the program depends on how the W-2 form was completed.
When you have non-taxable sick pay or long term disability, the amount should not be shown in boxes 1, 3 and 5. Instead it should show in box 12 with a code J.
Is your W-2 form filled out this way? Did you have taxable wages for this employer also?
If your W-2 shows taxable wages in boxes 1, 3, and 5, you should contact your employer to get it corrected.
No, you don't need a different version of TurboTax and you definitely should not leave off the W-2 form.
Whether or not your disability pay is taxed in the program depends on how the W-2 form was completed.
When you have non-taxable sick pay or long term disability, the amount should not be shown in boxes 1, 3 and 5. Instead it should show in box 12 with a code J.
Is your W-2 form filled out this way? Did you have taxable wages for this employer also?
If your W-2 shows taxable wages in boxes 1, 3, and 5, you should contact your employer to get it corrected.
Amounts were indeed entered in Boxes 1, 3, and 5 and absolutely nothing entered in Box 12.
I had only short-term disability for the other part of the year and received a completely different W-2 from my company from those benefits. The LTD W-2 is from the 3rd party insurer who pays out benefits; benefit premiums were paid as payroll deductions via my company. So 3.5 months STD and 8.5 months LTD. I did not have earned income during 2021.
In that case your W-2 form is wrong. You will need to contact your employer, HR department or the third party to get it corrected.