Excerpt: This notice provides guidance regarding the effect of the Working Families Tax Relief Act of (WFTRA), Pub. L. No. , On November 17, , the Internal Revenue Service (“IRS”) published Notice (“Notice”), clarifying some confusion over the definition. (IRB ) Corporate distributions of property; distribution by subsidiary Notice (IRB ) Notice withdrawn; IRS to continue.

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This TIR focuses on the instances where a child of a taxpayer who is not a “qualifying child” may be a “qualifying relative. A child of divorced parents, age 25, is a full-time student who lives with ir mother. If a taxpayer’s child does not meet the requirements of a dependent as a “qualifying child,” the child may still meet the requirements of a dependent as a “qualifying relative.

As a result of the expanded coverage required by the Massachusetts health care reform law, the child is included in the parent’s employer-provided health insurance coverage.

Except in the case of amounts attributable to and not in excess of deductions allowed under section relating to medical, etc. If an employee participates in an employer-provided health insurance plan, any amount which, but for this section, would be included in gross income of the employee by reason of coverage under the plan of any person other than the employee, to the extent such coverage is mandated by law. Feedback Did you find what you were looking for on this webpage? Generally, with respect to the personal income tax, Massachusetts adopts the Code as amended and in effect on January 1, For federal income tax purposes, an employee who opts for coverage for a nondependent child will be taxed on the fair market value of the child’s coverage to the extent that it exceeds any amount paid by the employee on an after-tax basis employee pre-tax contributions are considered to be employer contributions.

The child is supported by both his parents. As a result of extended employer-provided health insurance coverage for children “under 26 years of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U.


However, the exclusion is limited to contributions made for coverage of the employee, the employee’s spouse, and the employee’s dependents. Any child to whom section e applies shall be treated as a dependent of both parents for purposes of 20004-79 subsection.

IRS Notice 2004-79 Clarifies WFTRA Confusion

A noncash fringe benefit that is included in gross income is sometimes referred to as “imputed income. Massachusetts General Laws show more show less. The father is a Massachusetts resident. In Notice, C. Pursuant to IRS Noticethe definition of “dependent” for purposes 20004-79 the exclusion from gross income for employer-provided health insurance benefits is broader than the definition for purposes of claiming the dependency exemption for the child on the parent’s federal income tax return.

However, pursuant to G. The term “imputed income” is sometimes isr to refer to the value of a noncash fringe benefit an employee receives where federal notce requires the value of the fringe benefit to be included in the employee’s gross income.

We use your feedback to help us improve this site but we are not able to respond directly. Notce, the amendments require that on or after January 1,carriers issuing or renewing insured health benefit plans with coverage for dependents make coverage available for persons “under 26 years of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U. Pending specific guidance from the Internal Revenue Service, an employer must determine the amount of imputed income attributable to the health insurance coverage of an employee’s nondependent child under valuation principles articulated in federal income tax law.

So a child may qualify as a dependent for purposes of the exclusion from gross income for employer-provided health insurance benefits whether or not the parent actually claims the ors exemption for the child ira the parent’s federal income tax return. When does an employee’s child meet the definition of dependent for purposes of employer-provided health insurance coverage so that the entire value of the coverage is excluded from gross income?

IRS Notice Clarifies WFTRA Confusion – Benefits Counsel

The employee’s federal gross income for the year, as reflected in his or her W-2, will be higher and this higher amount will be subject to taxation and withholding. The Massachusetts Health Care Reform Act at chapter 58 of the Acts ofas amended, changed chapters 32A,A, B and G of the General Laws to require a broadening of dependent coverage offered by health insurance carriers.


Section a of the Code provides that gross income of an employee does not include employer-provided coverage under an accident or health plan. Where an employee is charged with federal imputed income for employer-provided health coverage, the employee is not charged with the imputed income for Massachusetts purposes where the health care coverage is required by state law.

Employer-provided health insurance coverage is a fringe benefit.

If you need a response, please locate the contact information elsewhere on this page or in the footer. Massachusetts gross income is federal gross income, as defined under the Code, with certain modifications. The exclusion from Massachusetts gross income under G.

As a result, Massachusetts will not follow federal law in the area of imputed income resulting from employer-provided health care fringe benefits. Under the terms of the divorce agreement, notiec mother may claim the federal dependency exemption for him. A fringe benefit is any property or service that an employee receives in lieu of or in addition to regular taxable wages.

If a child does not meet the definition of dependent for these purposes, the value of the health coverage for this individual will be imputed as income to the employee for federal income tax purposes. The gross income of noticw employee does not include contributions which his employer makes to an accident or health plan for compensation through insurance or otherwise to the employee for personal injuries or sickness incurred by him, his spouse, or his dependents, as defined in section Although generally Massachusetts follows federal law in the area of noncash fringe benefits, in the case of imputed income with respect to employer-provided health insurance, the Legislature has chosen to depart from the federal treatment.

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