Long Term Disability Pay...Taxable or Tax Free?

[CowboyPhil]

How do you determine if it is taxable or tax free?

My wife was not allowed to return to work in Apr 2016 due to her being on pain meds constantly. She was in the process of scheduling a pancreatic resection surgery that she eventually had in Dec of 2016. She was approved for long term disability in October of 2016, 6 months after claiming disability, and then was terminated the week before her surgery. She had continued to have her insurance withheld as long as she had ppl hours to cover them and then we paid for them out of pocket until her termination.

Upon her termination we continued to pay for her Cobra health insurance as she recovered from her surgery and pain management. We also continued to receive her long term disability payments as Metlife said she was covered as she had paid premiums for 20 years.

Now I'm trying to calculate taxes for her as they show it as wages but they withheld no taxes. I've seen answers on the internet as both ways, tax free and taxable.

Any help would be greatly appreciated.

 

[purkey]

you better get a pro to answer, but found this and it looks like they would not be taxable...it's not a simple deal it looks like.

"It depends. If you get a tax document (W-2 [box 1] or 1099-R) for the payment, it's taxable.
The rule is if you paid the insurance premium, with after tax money, the disability benefit is tax free. If your employer paid the premium (as in most cases) or you paid the premium with pre-tax money, the benefit is taxable."

 

[CowboyPhil]

Thanks for the reply.

I'm hoping to talk with a pro tomorrow, but I've found the same confusing info as you. BOX 1 has the total but then box 3 (SS) and box 5 (medicare) are both $0. BOX 13 is checked as 3rd party sick pay, with box 14 declaring the total as LTD.

I'm hoping for non-tax as it's about a $9k difference between fed and state and we could really use it.

 

[CowboyPhil]

Great news for me as it was an employee paid benefit post taxes, so no need to claim as income.

Now to file an amendment for the payments she received last year that I claimed as income.

 

[purkey]

Great news for me as it was an employee paid benefit post taxes, so no need to claim as income.

Now to file an amendment for the payments she received last year that I claimed as income.

well, good for you. The irs is your friend!

 

[FMPoke]

Depends on if the premiums were taxed. I believe if you paid for the premium with after tax dollars the benefits are not taxable. If you use your companies cafeteria plan and use pre tax dollars the benefits are taxable.

 

[CowboyPhil]

Correct. It was an employee paid benefit withheld after taxes