Software Club 210: Light Red/Club_Software_210_Light_Red_Micro_Star_1997.iso/sba/f242.sbe

Text File | 1997-01-01 | 2KB | 47 lines

@031 CHAP ZZ

           ┌─────────────────────────────────────────┐
           │        GROUP TERM LIFE INSURANCE        │
           └─────────────────────────────────────────┘

An employer, such as a corporation, may set up a group-term
life insurance plan as a fringe benefit and deduct the
insurance premiums it pays on behalf of its employees.  If
such an insurance plan qualifies as "non-discriminatory,"
then, to the extent the life insurance coverage on an
employee does not exceed $50,000 under the plan during the
taxable year, the premiums paid by the employer do not
constitute taxable income to the employee.  Even if an
employee's coverage exceeds $50,000, the amount the employee
must include in taxable income from the additional insurance
premiums paid by the employer for the excess coverage is
sometimes considerably less than the premium actually paid
(and deducted) by the employer.  (Note that any such taxable
amount is now considered "FICA wages" and is thus subject
to FICA taxes.)

Thus, like medical and disability insurance, group term
life insurance is a highly tax-advantaged fringe benefit,
being deductible by the employer, but not taxable as
compensation to the employee, in general.

Note that the owner or owners of an unincorporated business
cannot deduct the premiums for their own coverage under a
group life insurance plan, since they are not "employees"
of their businesses for tax purposes.  Similarly, while
a deduction may be allowed to an S corporation for such
coverage on 2% (or more) shareholders of the corporation,
the amount deductible will be treated as taxable compensation
to the shareholder, who will obtain no offsetting deduction.
Thus, as a business owner, you can obtain the above favorable
tax treatment for your own coverage under a group-term plan
ONLY if the business is set up in the form of a "C
corporation."

@IF119xx](Your firm is set up as a @ENTITY.
@IF119xx]
@IF119xx]As such, you can't write off group-term insurance premiums,
@IF119xx]unless @NAME becomes a C corporation.)
@IF117xx]NOTE:  @NAME is a C corporation.
@IF117xx]