Insurance shared with employer

[David Reed]

On Jan 20, 2006, at 11:09 AM, Marc Tardif wrote:

> * Brian Dolbec <brian_dolbec at telus.net> [2006-01-19 22:00 -0800]:
>> On Thu, 2006-19-01 at 19:57 -0500, David Reed wrote:
>>> In most cases in the U.S. it is a non-taxable benefit - I have a
>>> separate account/category - for this and my employer's contribution
>>> to my 403B.
>>>
>> If you look at his email address it is a dot ca as in Canada.  Up  
>> here
>> it is considered a taxable benefit and therefore shows in his gross
>> salary/wages for tax calculations, just like mine are :(   Even RRSP
>> deductions are still taxed at time of payroll.  You have to wait till
>> you get it back on your tax refund check if your lucky enough to get
>> one.
>
> I don't quite understand the distinction between a taxable and a
> non-taxable benefit. As pointed out by Brian, I am indeed in Canada
> so I have created the following accounts for taxes enforced by the
> government (as far as I understand):
>
>   Expense:Taxes:EI (Employment Insurance)
>   Expense:Taxes:QPP (Quebec Pension Plan)
>   Expense:Taxes:QPIP (Quebec Parental Insurance Plan)
>   Expense:Taxes:Federal (Federal taxes)
>   Expense:Taxes:Provincial (Provincial taxes)
>
> All the above taxes are deducted from my paycheck. However, I have
> insurance benefits paid to an insurance company also deducted from my
> paycheck. That insurance is what I was referring to in my original  
> email
> which is shared half and half with my employer. Does that constitute a
> taxable or a non-taxable benefit?
>
> Personally, I thought it was non-taxable because it was paid to an
> insurance company instead of the government. So, following suggestions
> proposed on this mailing list, I have created the following account  
> for
> insurance benefits:
>
>   Expense:Insurance:Benefits
>
> Also, to account for the amount of insurance benefits paid by my
> employer, I have created the following account:
>
>   Income:Insurance:Benefits
>
> So, for each paycheck, I would add $50 to Income:Insurance:Benefits  
> and
> then I would add $100 to Expense:Insurance:Benefits. So, the net  
> amount
> that is actually deducted from my salary for insurance benefits is  
> $50.
>
> -- 
> Marc Tardif


IANAA and I have no knowledge of Canadian taxes but think of it as if  
your employer was paying you the full amount and then you were then  
paying the insurance company directly. The total amount would be be  
taxable to you (just as if you were spending the money on anything  
yourself). Given that I would treat the entire $100 as income. If the  
$50 you pay is taxable but the $50 the company pays is not, then I  
would treat it as a 3 way split (the $50 of it that is taxable would  
be included in Income:Salary, the $50 that is not taxable would be in  
an account named something like Income:Non-taxable-benefit and then  
you have a $100 Expense:Insurance).

In the US, certain benefits are not taxed by the federal government  
and at least some states. But as others have mentioned, some are  
still subject to social security/medicare tax. The most common  
benefit that is not subject to tax is health insurance. A few  
employers still pay the full amount but most share the cost with  
employees, but none of it is subject to federal income tax. Changing  
that is one of the tax reforms mentioned, but I doubt will happen  
except for the possibility of taxing the benefit if it's over a  
certain amount that would only hit people who's companies pay for  
really expensive/extensive coverage. I believe that is the way life  
insurance paid by the employer is handled - IIRC any amount paid for  
coverage more than $100,000 is subject to tax).

So anyway, don't take any of my tax statements as 100% correct, but  
hopefully my suggestion for making the split transaction makes sense.

HTH,
Dave