Discussion:Employer voluntarily pays employees medical expenses.
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> Employer voluntarily pays employees medical expenses.
Discussion Forum Index --> Tax Questions --> Employer voluntarily pays employees medical expenses.
| 3 October 2008 | |
| Hi Everyone;
I have a client who has part-time employees to reduce insurance benefits. An employee of my client did not have medical insurance, but incurred medical bills. My client (my client's company) paid medical bills on behalf of the part-time employee out of kindness. I believe this may have to be included as part of the employees salary in order for my client to take the deduction? Of course, my client would like to take it as a chartiable deduction, but he can't do this since the client is not an IRS approved charity :) I was wondering if anyone knew of a way my client could take a deduction without making his poor employee owe taxes? Thank you again! Nancy | |
RoyDaleOne (talk|edits) said: | 3 October 2008 |
| I doubt it was totally out of kindness, the employer, surely, wanted an employee who was healthy, productive, one without outside problems that could interfere with the employee's work, such as, needing a full time job to be able to pay off the medical bills and leaving for that reason. Gifts to individuals are non-deductible, as I recall, any my recall may be wrong.
Do a search covering Sec 105 and 106 concerning the need for a plan. Sec 105 and 106 are very liability in there implementation however, I think there must be a plan. See the relevant court cases for what constitutes a plan. | |
| 3 October 2008 | |
| RoyDale is right. There must be a written plan in place, and a self-insured plan (which this would be) cannot be discriminatory - can't just pick one employee it would apply to. Bottom line, either non-deductible gift, or additional (taxable) compensation to employee. | |
Death&Taxes (talk|edits) said: | 3 October 2008 |
| Stress to the client that the employee is getting the bills paid for the income tax cost. | |
| 3 October 2008 | |
| This could get ticklish: say he paid for a part-time male employee's bill, and not a part-time female employee's bill. I frankly don't know if this would violate EEO laws, but it would make me nervous. | |
| 3 October 2008 | |
| you think the male employees are more ticklish? I guess it depends on where you tickle them. And that thought does make me nervous as well, Crow. | |
| 3 October 2008 | |
| Thank you everyone for your ideas and input. It's so wonderful having a forum to bounce ideas off of! Nance | |
| 3 October 2008 | |
| I see no gift here. I see no problem with deducting this expense. However, the employee would need to include this in gross income unless there is Sec. 105 plan in place. | |
