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Tax deductions on disability income Massachusetts

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  • Pattymd
    replied
    Originally posted by cbg View Post
    For responders who might notice the discrepancies in dates between the last post and the one before it, this thread was brought forward by a spammer who made some attempt to disguise his spam by making a marginally relevant comment. That post has been removed.
    I thought maybe.

    Leave a comment:


  • cbg
    replied
    For responders who might notice the discrepancies in dates between the last post and the one before it, this thread was brought forward by a spammer who made some attempt to disguise his spam by making a marginally relevant comment. That post has been removed.

    Leave a comment:


  • CAIW
    replied
    Sometimes the answer to these questions isn't simple 'yes' or 'no'...
    But the IRS has a tendency to provide the answer...

    There is a bulletin here http://www.irs.gov/irb/2004-26_IRB/ar06.html, and as cbg said, who pays the premiums determines what portion if any is taxable.

    You need to have the policy to determine the type of income, and the basis for payment of benefits.
    Many STD/LTD policies pay only a portion or % of your wages. ie 2/3's of your gross, and taxes are not deducted, the benefits may or may not be taxable, or only a portion taxable. Again, depends on who pays the premiums, or portion of the premium.

    The reason I ask is that he just received his first check and it appears that the company has deducted 48% of his entire gross wages in taxes. He currently makes $13/hour. $13/hour x 40hrs/pay period = $520 before taxes. The check he received was for $267 meaning they took out $253 in taxes.

    To tell you the truth the only thing we know for certain is the amount that was direct deposited into his checking account.
    As you don't have a check stub, you don't really know that the net amount of the deposit is reduced due to 'tax deductions'...(?)

    Do you know WHY he is receiving STD benefits ?
    Was there an injury/accident/illness specific... was this a work related injury ?
    Is this being paid as STD or Workers Compensation TTD/Temporary Total Disability ?... TTD would NOT be taxable at any point.
    Hr for me: Yes, he is on FMLA.
    The employER is required to keep the benefits intact, including health coverage, (for up to 12 weeks/annum) but he is still responsible for his portion. I don't believe a IC paying STD/LTD would make those deductions...he'd have to pay the ER out of pocket. But, then again that would be policy specific.

    Leave a comment:


  • hr for me
    replied
    And realize that benefits such as medical insurance are rarely a % of income, but rather a flat amount and therefore would be a lower % of a regular check but a higher percent of a lower check.

    For example, say a regular check is $1000 and health insurance is $250 (which calculates at 25%). The STD check is $500 but health insurance is still $250 (which now is 50% of the check). So that deduction makes up a larger portion of the check.

    Definitely the actual paystub should help. If not, I would check with HR/payroll to get a better explanation.

    Leave a comment:


  • Pattymd
    replied
    Let's get the paystub, without that I really can't speak any more intelligently to the withholding issues.

    Leave a comment:


  • cbg
    replied
    If this is an STD policy through a third party carrier (Unum, NML, Humana, etc.) then another factor that matters is whether the premiums are paid for by the employer, the employee, or a combination of both. That has a major impact on taxation of STD benefits.

    If this is salary continuation through the employer, that's a different story.

    Leave a comment:


  • frustrated_MA_employee
    replied
    Wow, that's a lot of responses in such a short period of time. I will try to respond to all of them as best as I can with the very limited information both my brother and I have at the moment.

    I haven't reviewed his company's STD policy so unfortunately I don't know if his is pre-tax or post. To tell you the truth the only thing we know for certain is the amount that was direct deposited into his checking account. His HR manager told him it was for 40 hours. Without seeing his pay stub, which hasn't come in the mail yet, I can't say for certain what taxes were taken out and in what amount.

    He is completely fine with the fact that they would make deductions since he was under that assumption to begin with. I have always assumed that they would continue to deduct his regular state/federal/SS/medicare and benefit taxes on his STD income, it is just the simple math that has me a little bit confused. If his HR manager is correct in saying that his direct deposit in the amount of $267 was for 40 hours, and he makes $13/hr, then they deducted $253 (40x13 = 520. 520-267 = 253). Until he either gets a hold of his HR or sees his pay stub we don't know exactly what the deductions were.

    Before he started collecting STD all of his deductions from his typical paychecks did not total 48% of his gross earnings.

    Pattymd: I'm not sure who cut the check but I do know that he does not have any additional W-4 withholdings. He does claim Single-0.

    Hr for me: Yes, he is on FMLA.

    Leave a comment:


  • Pattymd
    replied
    Yep, HR for Me, that could be a component as well.

    Leave a comment:


  • hr for me
    replied
    Is it possible that they deducted for any continued insurance or other benefit deductions? Is he on FMLA? If they are still paying for him to be covered under benefit plans, they can still deduct the premiums, but should have informed him that they would be doing so.

    Leave a comment:


  • Pattymd
    replied
    Simple. Who cut the check?

    I'm thinking MAYBE, if it's the employer, does the recipient have a W-4 in effect for an additional amount per pay?

    In any case, if it's through an insurance company and taxable, and there is no W-4 in effect, they would be withholding at Single-0. If it's salary continuation through the company, it's almost certainly taxable, and the W-4 that was in effect for regular pay would apply to this payment also. But only that amount paid is taxable, not the amount of compensation that would have been paid if he were working.

    Were FICA/Medicare taxes deducted?

    Leave a comment:


  • Morgana
    replied
    Some STD policies are pre tax and some are post tax. Do you know for sure about his?

    Leave a comment:


  • frustrated_MA_employee
    replied
    Thanks for your response.

    Neither of us know as of right now if it is a continuation of his salary or TTD from the insurance company. I'm not even sure what TTD is. He had just found out that he received his first payment two days ago when he finally got a hold of his HR manager. He had gotten off the phone before he realized the amount seemed a little low, he was just happy to hear his forms had been processed. He is still waiting for his pay stub to come in the mail to see what it says.

    My only theory was that maybe that amount reflected the time from when they received and processed his paperwork through the end of the pay period as opposed to the entire pay period.

    I will let him know to call his HR manager back to get some clarification. Just hypothetically though between now and when he gets a hold of her, if it is a continuation of his salary, can they deduct based on his 60 hour pay period even though he is only receiving 40 hours worth of pay?

    Leave a comment:


  • Pattymd
    replied
    This is a salary continuation paid by the employer or TTD paid by the insurance company?

    Has he called to inquire yet?

    Leave a comment:


  • Tax deductions on disability income Massachusetts

    I have a pretty simple question about tax deductions on disability income. Prior to being out on STD my brother was working 60 hours per pay period (every two weeks). Now he is on STD and his disability income pays him for 40 hours per pay period (60% of his hours). My question is, do they deduct taxes based on his regular 60 hour per pay period schedule or his reduced STD schedule of 40 hours per pay period?

    The reason I ask is that he just received his first check and it appears that the company has deducted 48% of his entire gross wages in taxes. He currently makes $13/hour. $13/hour x 40hrs/pay period = $520 before taxes. The check he received was for $267 meaning they took out $253 in taxes.

    I don't know anyone personally who has ever been on STD, and maybe I am missing something or there are facts about STD that I am unaware of. But does this sound correct?

    Thank you
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