Today TaxMama hears from Vicki in Washington State, with this quick question. “Does imputed income affect Social Security and Medicare taxes as well as federal taxes?
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”
Dear Vicki,
Well, first you need to understand what imputed income is.
It’s income that you don’t necessarily receive, kind of like ghost income.
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But it’s income that someone is supposed to record by law.
For instance, when you have below-market interest rates on loans between family or friends. IRS sets an interest rate (monthly, in fact) for the minimum you are allowed to charge on a loan. So, when your dad gives you a 0% loan, there is an imputed rate of interest – even though you are not paying. For instance, Dad has to report interest income at 3.81% for a long-term loan issued in May of 2009 – even though he doesn’t receive a dime. https://www.irs.gov/app/picklist/list/federalRates.html
In that instance, Social Security and Medicare are not affected.
However, when you are an employee, and your company pays for health insurance coverage for non-dependents, that is imputed income to you.
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IRS has ruled that this imputed income is treated as supplemental wages – and all the regular payroll taxes are to be assessed – income tax withholding, Social Security and Medicare.
http://klassroom.co/files/migration/new/writing-an-argument-essay.html
https://www.irs.gov/irb/2006-37_IRB/ar09.html
And remember, you can find answers to all kinds of questions about imputed income and other tax issues, free. Where? Where else? At TaxMama.com
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