Recently TaxMama® was at the IRS stakeholder meeting in Downtown Los Angeles. This triannual meeting between IRS and key members of the tax professional community always results in interesting experiences. One of the tidbits I’d like to share is about the special COBRA benefit in the recent tax law.
You maybe aware that people who have been laid off or fired from their jobs where their insurance was “COBRA’d,” can have their employer pay 65% of the premiums. You’ll find the details here – https://www.irs.gov/newsroom/article/0,,id=204505,00.html .
But here are a few things you need to know in order to qualify:
- You had to have been terminated before September 8th, 2008 and December 31, 2009.
- It must have been an involuntary termination. In other words, if they asked for volunteers to save someone else’s job, your kindheartedness has just cost you this benefit.
- When you leave (if you’ve qualified) you had to elect to participate in the COBRA program and pay the premiums.
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- This 65% benefit is covers up to 9 months of payments (not the full 18 months of COBRA benefits) – starting from February 17, 2009 – December 31, 2009.
- You have to make your COBRA insurance payments to your employer on time. If not, the employer will not pay your insurance and you will lose the benefit.
Under what circumstances are you going to lose this?
If your employer shuts down and goes out of business, obviously they won’t be paying 65% of your premiums.
Great news for employers – even if you make the COBRA payments at the end of the month, for payroll tax purposes, it’s as if you have made the payments on the first of the month or the first of the quarter and this can reduce any late payroll tax penalties.
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You get reimbursed for your COBRA payments by directly reducing the payroll taxes you need to submit to IRS on the Form 9401.
If there is still a credit left over after you have paid the payroll taxes, you can either apply them to next quarter’s payroll taxes or have IRS send you a check.
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Resources :: COBRA Health Insurance Continuation Premium Subsidy