+Prepared by:Jumpstart:HR                                                   Domestic Partnership“Get more HR while doing l...
+    What you will learn:     Non-Dependent             Domestic Partners     FICA Tax       Interpretation of Domestic ...
+    Non-Dependent Domestic Partners     Health benefits for non-dependent domestic partners     are treated differently ...
+    Non-Dependent Domestic Partners    Continued      Imputed   income is not subject to the federal income       tax wi...
+    FICA Tax Purposes     Imputedincome is subject to withholding for     FICA tax purposes.      For  employees: Depen...
+    FICA Tax Purposes Continued      For  employers: Since the imputed income increases        the employees overall tax...
+    Dependent Domestic Partners     Domestic  partners who meet the definition of a     dependent under IRC Sec. 152 are...
+    What if:       The employee has a domestic partner who is not a legal dependent?http://www.jumpstart-hr.com | http:/...
+    How to Calculate Imputed Tax (IT)    Employee and Spouse w/out IT                   Employee and Spouse with IT     ...
+    What if:       The employee has one (or more) legally dependent child and a        domestic partner?http://www.jumps...
+    How to Calculate Imputed Tax (IT)        Employee + Family w/out IT                  Employee + Family with IT      ...
+    Got questions? We’re here to help.    “Get more HR while doing less.”       Navigating and communicating        the ...
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Domestic Partnership: Health Benefits and Tax Implications

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Domestic Partnership: Health Benefits and Tax Implications

  1. 1. +Prepared by:Jumpstart:HR Domestic Partnership“Get more HR while doing less.”http://www.jumpstart-hr.com Health Insurance Benefitshttp://twitter.com/JumpstartHR and Tax Implications http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR | LinkedIn: “Jumpstart:HR”
  2. 2. + What you will learn:  Non-Dependent Domestic Partners  FICA Tax Interpretation of Domestic Partnership Benefits  Dependent Domestic Partner Benefits  How to calculate imputed taxes on domestic partnership health insurance benefits.  How to Create Effective Employee Benefits Communicationhttp://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  3. 3. + Non-Dependent Domestic Partners  Health benefits for non-dependent domestic partners are treated differently under the Federal Law. Currently health benefits for non-dependent domestic partners are taxed as imputed income.  Imputed Income is the addition of the fair market value of non-cash compensation, i.e. the benefits, to the employee’s taxable wages in order to properly withhold income and employment taxes from the wages.  Imputed income is reported on Form W-2 as the estimated value of the employer’s financial contribution towards health insurance coverage  Many employers simply take the difference between the cost of single coverage and the cost of family coverage or one- dependent coverage to determine the fair market value of the benefits.http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  4. 4. + Non-Dependent Domestic Partners Continued  Imputed income is not subject to the federal income tax withholding rules. Employees may choose to have federal income tax withheld on the imputed income, or to pay what may be due when filing their federal income tax return.  Pre-tax dollars may not be used to pay for the partners coverage, limiting the use of Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs).http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  5. 5. + FICA Tax Purposes  Imputedincome is subject to withholding for FICA tax purposes.  For employees: Depending on the individual and the estimated value of the health benefit, can be in the thousands of dollars per year and can result in the individual paying upwards of 50% more in federal taxes. As of 2007, employees with domestic partner benefits paid on average $1,069 per year more in taxes than an employee with the same coverage for a different-sex spouse.http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  6. 6. + FICA Tax Purposes Continued  For employers: Since the imputed income increases the employees overall taxable income, it also increases the employers payroll taxes, the federal Social Security (FICA) and unemployment insurance tax (FUTA), that employers pay based on employees taxable incomes. Employers collectively pay a total of $57 million per year in additional payroll taxes because of this unequal tax treatment. Employers also face additional administrative responsibility of annually tracking the dependent status of covered same-sex partners and spouses and maintaining separate payroll functions for income tax withholding and payroll taxes.http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  7. 7. + Dependent Domestic Partners  Domestic partners who meet the definition of a dependent under IRC Sec. 152 are allowed to forgo the additional tax liability. To qualify, an individual must meet all of the following requirements:  The employee provides more than 50% of the partner support.  The individual is a member of the employee’s household.  The domestic partner’s residence is the same as that of the employee **This information can be applied for health benefits for same-sex domestic partners and spouses**http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  8. 8. + What if:  The employee has a domestic partner who is not a legal dependent?http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  9. 9. + How to Calculate Imputed Tax (IT) Employee and Spouse w/out IT Employee and Spouse with IT  $150 monthly premium for  $150 monthly premium for Employee Only Health Plan Employee Only Health Plan  $250 monthly premium for  $250 monthly premium for Employee + Spouse Health Employee + Spouse Health Plan Plan  Employee pays $250 for  $250 - $150 = $100 difference Employee + Spouse monthly between plans premiums using pre-tax dollars.  Employee pays taxes on the $100 differencehttp://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  10. 10. + What if:  The employee has one (or more) legally dependent child and a domestic partner?http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  11. 11. + How to Calculate Imputed Tax (IT) Employee + Family w/out IT Employee + Family with IT  $250 monthly premium for  $250 monthly premium for Employee + Child/ren Health Employee + Child Health Plan Plan  $500 monthly premium for  $500 monthly premium for Employee + Family Health Employee + Family Health Plan Plan  $500 - $250 = $250 difference  Employee pays $500 for between plans Employee + Family monthly premiums using pre-tax  Employee pays taxes on the dollars. $250 differencehttp://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR
  12. 12. + Got questions? We’re here to help. “Get more HR while doing less.”  Navigating and communicating the new Health Care laws and regulations can be a challenge. Leverage our HR expertise to help your organization reduce time and money spent away from current business needs.  http://www.jumptstart- hr.com/contact  info@jumpstart-hr.com Contact us today to get started!  301-244-8577http://www.jumpstart-hr.com | http://www.twitter.com/JumpstartHR

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