Answers about- Group Insurance Life Tax Term and Information:
Group Insurance life tax term information is important to make sure your company is not violating an IRS tax law.
Group insurance life term plans and affordable health insurance term life policies must be structured correctly.
No insurance company I know of will take the fall for violations to the IRS tax code. Your business will be held liable for the violating tax codes.
Most likely though your company will need to pay additional taxes if you offer more life insurance to the employee than what is allowed. (if employer paid).
Consequently, the employee also will have to pay taxes if the maximum allowable is exceeded. (again, this is if the life insurance is paid for by the employer.) These rules do not apply if the employee is paying 100% of the benefit amount.
If you believe that you or your company has been taken advantage of relating to IRS tax code and the insurance policies sold within your company, it will be the your (company’s) responsibility to bring suit against the insurance company in question.
This page was written to help you understand what the law says regarding life insurance and your business tax laws. I am not an attorney so if you need specific help on an IRS subject consult your attorney.
This information is taken directly from the IRS tax code as it relates to Group Insurance Life Tax term questions. I’ve broken it down in easy to understand terms as follows.
What is the Maximum Life Insurance Face Amount Allowed for Employer Paid Life Insurance?
50,000 face amount per employee if employer paid. Any amount over this is considered as additional income that must be taxed.
The employer pays any cost of the life insurance.
There are no additional taxes if the total amount of life insurance policy/s provided for any one employee does not exceed 50,000.
If a policy is not carried directly or indirectly by the employer there will be no tax consequences to the employee. “If the employees are paying the cost and the employer is not redistributing the cost of the premiums through an insurance system, the employer will have no reporting requirements.”
A common use of this type of policy would be group insurance life term ryders that are added to the health insurance company.
The insurance company should know well enough to keep these amounts below 50,000 without consulting and educating the employer regarding the above tax questions.
But we have seen in some situations where this discussion never occurred and the employer did not find out about such tax liability until filing for taxes at the end of the year.
No doubt if the employer asks to offer a larger amount than usual such as over 50,000 the agent would be happy with the additional premium. Which may explain why the discussion never came up.
The best way to be sure no violations of this rule are taking place is to make sure the face amount of any life insurance paid for by the employer does not exceed 50,000.
Otherwise, straddling rules will come into play and need to be calculated to determine the tax liability of the employer and employee. This is common for any contributory Life or Health insurance plan.
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