I could be wrong, but I think this is what they are misinterpreting:Yeah, the Government is counting the insurance premium as earned income that we will get taxed on.
I think they were supposed to be taking it out the whole time and just realized that they weren't and had to take it out all at once, before the first of the year.
they are supposed to send us an explanation in our pay stub this week...I will know more when I get it.
In the US, life insurance proceeds are income tax free.
The one exception is life insurance paid by an employer (your father's place of work, for example) for his benefit. In that case the first $50,000 of death benefits are income tax free, the rest is taxed. If your father died and had a $250,000 policy at work, $50,000 of the payout would be tax-free and $200,000 would be taxed.
Besides, $400 TAX on the premiums? Do you all have $1,000,000 dollar policies? Even at a 20% withholding, this means they are paying $2000/year for your premiums for a GROUP life insurance policy? I think they need to shop around!
Just curious, did they just hire someone new in payroll?
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