imputed health care cost for CA RDP

[LSTAX]

I'm ready to split a CA registered domestic partner return into two single returns and learned the one working partner was given numbers for imputed income from their employer for health insurance for the non working partner.  I cannot tell by looking at the W2 if the imputed income was included already.  Boxes 1, 3, 5 and 16 (state wages) are all the same.  A paystub shows employee and employer pre and post tax medical and dental deductions so it appears they are tracking the benefit but how do I know if it was included in federal income but not CA income?

Thank you 

[qbteachmt]

"but how do I know if it was included in federal income but not CA income?"

Well, you stated Fed wages are the same as the State breakout, which means there wasn't anything different for CA. And you stated you have all the clarity of pre-tax and post-tax. And you stated the employer provided data specifically described as "for the non working partner."

What part still is missing, then?

[LSTAX]

sorry for the delay - I was getting page errors when I tried to respond. 

The W2  boxes 1, 3 5 and box 16 (CA state wages) are all the same amount.  Federal was treated correctly - employer partner health insurance deduction was post tax.  CA doesn't conform to that tax treatment so shouldn't the W2s in these situations have a lower amount in box 16 - lower by the imputed income for partner's health insurance?

Thank you

[qbteachmt]

"CA doesn't conform to that tax treatment"

I'm still a bit confused. Sorry. You are asking about "that tax treatment" but which tax treatment is this?

You stated it was provided for information purposes. You stated it was paid post-tax, which means it reduces the takehome. There is/was no tax benefit, then. It's no different than if the person paid personally for that amount, but the employer included it in the premium payments. This is what I describe in my payroll class as, "The employer did the Banking." This is because it is a group policy; but the employee paid the cost.

The employer gave info that is provided for CA required proof of coverage, because CA has the ISR. It also is provided for any other reason, such as self-employment coverage deduction.

What you describe is that the person's Fed Gross also is their CA Gross. How is this wrong?

[LSTAX]

What should the W2 look like in box 16?  Should it be the same as federal box 1?  There is $4,000 that the IRS did not allow a pre-tax deduction.  Should I adjust the CA  income down by that $4,000 or do I use the number on box 16?

I didn't say it was provided for information purposes it is on the paystub.

[qbteachmt]

If a person works in one State, and there is no exception in that State to taxable wages that is different than Fed, then Fed and State wages are the same. If a person works in two States, such as your person works in Oregon sometimes and in CA sometimes, then each State would be an amount. And some States, such as NY, taxes income by Source, so the people who live in NJ and work in NY have to report all the income to NY, even if some of the work was done in NJ; NJ is then going to have an offset for the part not in NJ.

"There is $4,000 that the IRS did not allow a pre-tax deduction."

How does that have any bearing on what you are describing? Here's what you seem to describe: the employer has reported the amount that your taxpayer had deducted post-tax to pay for coverage for their RDP.

That has no tax treatment of any kind. It's just their personal money, because it was paid from what would have been takehome. It's no different than if they paid for that health care premium personally, paid the Vet for their animal care, or took a fancy trip on it.

And you have proof of coverage for your taxpayer and RDP, which matters in CA, for MFS.

"Should I adjust the CA income down by that $4,000"

You are asking about the Gross Pay, which has been reported and taxed and that is what the person Earned and how they can afford to pay their bills, including this RDP coverage.

"or do I use the number on box 16?"

Why would you try to do otherwise? You have the W2. You don't change the reported values. You are not the employer. You did not issue that document.

I'm still not seeing your reference to anything that explains why you think something has been reported incorrectly.

Not everything in payroll qualifies for pre-tax deduction; that's why it is done post-tax. Do you think the employer did it wrong?

[qbteachmt]

"I didn't say it was provided for information purposes it is on the paystub."

Which, by law, must be provided to the employee, for informational purposes, so that they can see the Gross to Net result of the paychecks.

[LSTAX]

yes - my question is does it look like the W2 is wrong for CA line16?  

IRS imputes extra tax on those benefits and CA is not supposed to.

[qbteachmt]

"IRS imputes extra tax on those benefits and CA is not supposed to"

I'm not sure I can be more help. You are not taxed a second time on a benefit you already paid for out of post-tax dollars, which is how you describe that $4k. Did you enter it somewhere other than the W2 input?

[LSTAX]

I really appreciate your help but we seem to be discussing things differently.  

Here is my example and maybe someone familiar with CA RDP taxation can weigh in.

Gross Pay = $5,000

pre-tax health for employee $500  (saved tax)

net federal taxable income  $4,500

payroll taxes withheld on $4,500 of income = $2,000

post tax payroll deduction for CA RDP health insurance  $300  (does not save tax but if this was a spouse, not a registered domestic partner  it would have been pre-tax)

net check $2,500

For CA same net check but the $300 was not supposed to be post tax.

W2 has same taxable income box 1 and 16

California affords the same rights to registered domestic partners as to married individuals. As such, amounts spent on domestic partner healthcare is exempt from California taxes under Revenue and Taxation Code section 17021.7.

[qbteachmt]

Here's where you started this discussion: "I cannot tell by looking at the W2 if the imputed income was included already."

The pertinent details you've given are:

"payroll taxes withheld on $4,500 of income = $2,000"

and...

"net check $2,500"

These details clearly show that the $300 is from takehome pay as a Post Tax deduction. So, the amount has not gotten any tax benefit treatment through payroll. As I pointed out, it's the same as if these people personally paid for the RDP coverage, such as, the RDP has an individual policy through Covered CA and not the employer of the other person.

"W2 has same taxable income box 1 and 16"

The CA wages is not changed from what you see on the W2. You keep asking about reducing the Wages. But what you really have is the condition of: If there is a CA tax benefit on entering the Premium Payment cost, this $300 is that amount. The $500 is not, because it already got favorable tax treatment by being paid pre-tax through payroll deduction. For instance, CA Medical Itemized Deduction would not include $500 but would include $300, if that is where you enter Health Care Premiums paid to exclude them from taxable income.

You keep asking for the wrong thing to do.