Professional Services Accounting ARTICLE -
When are Disability Benefits Taxable?
Target Audience: Law Firm Professionals, Interest in Employee Contributions and Benefits, Those on Long-term Disability, Professional Services Accounting
The IRS issued Revenue ruling 2004-55 on June 9, 2004 stating that, long-term disability benefits received by an employee who has irrevocably elected, prior to the beginning of the plan year, to have the coverage paid by the Employer on an after-tax basis for the plan year in which the employee becomes disabled are attributable solely to after-tax employee contributions and are excludable from the employees gross income under §104(a)(3).
Long-term disability benefits received by an employee whose coverage is paid by the Employer on a pre-tax basis for the plan year in which the employee becomes disabled are attributable solely to pre-tax Employer contributions and are includible in the employees gross income under §105(a).
These holdings are equally applicable to short-term disability benefits.
Find out how our expertise in professional services accounting can add value to your business. Email us or call us at 1 (888) 875-9770.
related links
Specialized Professional Services
Litigation & Forensic Accounting
Law Firms
Specialized Law Firm Services
Law Firm Newsletter Archive
Tax and Business Updates |
