Unit 22 - Taxation fo Health Insurance

Nonqualified withdrawals from a health savings account are subject to income taxes and a penalty of

20% Distributions from an HSA for expenses other than qualified medical expenses are subject to income tax and a 20% penalty tax unless the account beneficiary has died, become disabled, or is age 65 or older.

All of the following are eligible to establish a health savings account (HSA) EXCEPT

A GROUP OF UNASSOCIATED INDIVIDUALS Employers, individuals, and families can establish HSAs. Random groups of individuals, however, are not eligible.

The premiums and benefits in a business overhead expense plan are

DEDUCTIBLE AND TAXABLE A business overhead expense plan taxes benefits and allows for premium deductions.

Which of the following is NOT a benefit of a qualified long-term care policy?

EXPENSES ARE REIMBURSABLE UNDER MEDICARE Qualified long-term care insurance receives favorable tax treatment. Benefits are tax-free and premiums may be tax deductible. Expenses are never reimbursable under Medicare.

Which of the following statements regarding health savings accounts (HSAs) is NOT correct?

INDIVIDUALS WHO ARE COVERED BY MEDICARE ARE ELIGIBLE TO ESTABLISH HSAs Individuals are ineligible to establish an HSA if they have other comprehensive medical expense coverage such as Medicare.

With employer-paid group health insurance, premiums are

NOT TAXABLE FOR EMPLOYEES When an employer pays the premiums for a group health insurance policy, the premiums are not taxable for the employees and are deductible for the employer.

With employer-paid group health insurance, premiums are

NOT TAXABLE FOR EMPLOYEES When an employer pays the premiums for a group health insurance policy, the premiums are not taxable for the employees and are deductible fro the employer.

Which of the following statements regarding medical expense policies for people who are self-employed is NOT true?

PREMIUMS ARE NOT TAX DEDUCTIBLE A person who is self-employed may deduct 100% of her health insurance premiums from her gross income as long as she shows a net profit for the year and does not claim a deduction if she is eligible to participate in a group health plan, including one that is offered by her spouse's employer. The benefits received are not taxable.

Which of the follow gin statements regarding medical expense policies for people who are self-employed is NOT true?

PREMIUMS ARE TAX DEDUCTIBLE A person who is self-employed may deduct 100% of her health insurance premiums from her gross income as long as she shows a net profit for the year and does not claim a deduction if she is eligible to participate in a group health plan, including one that is offered by her spouse's employer. The benefits received are not taxable.

Which of the following is NOT a type fo business disability insurance plan?

SPLIT-DOLLAR Businesses use disability insurance plans to assist a business in the event a key individual or business owner suffers a disability. The 3 types of plans are business overhead expense policies, key-person disability insurance, and disability buyout insurance.

When a group disability insurance plan is paid entirely by the employer, benefits paid to disabled employees are

TAXABLE INCOME TO THE EMPLOYEE Disability benefit payments are subject to income tax as well as FICA tax for the first 6 months.

When a group disability insurance plan is paid entirely by the employer, benefits paid to disabled employees are

TAXABLE INCOME TO THE EMPLOYEE Disability benefit payments that are attributed to employee contributions are not taxable, but benefit payments that are attributed to employer contributions are taxable.

When the premium for qualified long-term care insurance are paid by an employer,

THE BENEFITS ARE TAX-FREE UP TO A SPECIFIED INFLATION-INDEXED LIMIT FOR EMPLOYEES Employer-paid group long-term care insurance is deductible to the employer, not taxable to the employee, and benefits are tax-free to the employee up to certain specified limits.

When the premiums for qualified long-term care insurance are paid by an employer,

THE BENEFITS ARE TAX-FREE UP TO TA SPECIFIED INFLATION-INDEXED LIMIT FOR EMPLOYEES Employer-paid group long-term care insurance is deductible to the employer, not taxable to the employee, and benefits are tax-free to the employee up to certain specified limits.

If a business entity purchases disability insurance on the lives of the business owners to fund a disability buyout,

THE BUSINESS CANNOT TAKE A DEDUCTION FOR THE PREMIUMS PAID If a business entity is the purchaser, policy owner, beneficiary, and premium payor of disability insurance covering the lives of its business owners, the premium are nondeductible. However, the proceeds are exempt form regularly calculated income tax.

If a company pays the premiums on a disability income policy covering a key employee

THE COMPANY RECEIVES BENEFITS FROM THE POLICY INCOME TAX-FREE If a company pays the premiums on a disability income policy covering a key employee, the company cannot deduct the premium if the monthly benefit is payable to the corporation. The benefits received form the policy are not taxed.

Sajji has an accidental death and dismemberment policy through her company. what is the tax treatment on the expenses if her employer pays 100% of the premiums?

THE PREMIUMS ARE DEDUCTIBLIE FOR HER EMPLOYER AND HER BENEFITS ARE TAX-FREE If an employer offers an accidental death and dismemberment policy to employees and pays 100% fo the premium, those premiums are deductible to the employer and are not taxable to the employee, and the employee receives the benefits tax-free.

If a company busy disability buy-sell insurance,

THE PREMIUMS ARE NOT DEDUCTIBLE BY THE BUSINESS A business cannot deduct premiums paid for disability buy-sell insurance, but the benefits received are not taxed.

Health reimbursement accounts are established by employers who provide covered employees with high-deductible health plans. The employer makes tax-deductible contributions, which employees can use for all of the following purposes EXCEPT

TO CREATE TAX-DEFERRED SAVINGS ACCOUNTS Health reimbursement accounts (HRAs) are high-deductible health accounts set up by employers through tax-deductible contribution on behalf of their employees. Employees may use the funds in the HRA to pay for deductibles, co-payments, and their coinsurance amounts.