Ch 9 Federal Tax Considerations for Health Insurance

Question 1

Gross income (all income from whatever sources) minus adjustments to income

Answer 1

Adjusted gross income

Question 2

The employer specifies an amount of benefits promised to the employee

Answer 2

Defined benefit plans

Question 3

Focus on contributions rather than on the benefits they will pay out

Answer 3

Defined contribution plans

Question 4

Internal revenue service US government agency responsible for collecting of taxes, enforcement of the internal revenue code

Answer 4

IRS

Question 5

A qualified expense that may reduce the amount of income subject to taxation

Answer 5

Tax deductible

Question 6

Not subject to taxation

Answer 6

Tax exempt

Question 7

Subject to taxation

Answer 7

Taxable

Question 8

The employer pays the entire cost of the disability insurance premium, so the income benefits are included in the employees gross income is taxed as ordinary income

Answer 8

Noncontributory

Question 9

The employee pays the entire cost of the disability insurance premium, so the income benefits or receive income tax free by the employee

Answer 9

Fully contributory

Question 10

Because of disability insurance is paid partially by the employer and partially by the employee. The portion paid by the employer has received income tax free and the portion paid by the employer is included in the employees gross income and taxes ordinary income

Answer 10

Partially contributory

Question 11

Disability insurance premiums are deductible as a business expense; benefits are taxable income for employees.

Answer 11

True

Question 12

Premiums paid by employer or tax deductible as the employers business expense.

Answer 12

True

Question 13

In key person disability insurance, the business is the contract owner, premium payer, and the beneficiary.

Answer 13

True

Question 14

Personally owned health insurance

Answer 14

• premium payments nondeductible

- benefits received tax free

Question 15

Employer-provided health insurance

Answer 15

• premium payments made by employer deductible as a business expense
• benefits received by employee taxable to employee as income

Question 16

Medical and dental expenses

Answer 16

Employer premiums or deductible; premium by the employee is not deductible

Question 17

Long term care

Answer 17

Premiums are deductible; daily benefits that do not exceed cost or tax free; excess cost taxed

Question 18

Accidental death and dismemberment

Answer 18

Policies are deductible to employer benefits are tax free

Question 19

Coverage for sole proprietors and partners

Answer 19

• deduct 100% of medical expense cost
• provided to self-employed and families
• may not exceed taxpayers earned income

Question 20

Key person

Answer 20

• premium not tax deductible to business

- benefits tax free by business

Question 21

Buy sell agreement

Answer 21

• premiums not deductible the business

- benefits tax free by business

Question 22

HSA’s

Answer 22

Tax deferred growth; excess funds can be carried over to the next year

Question 23

HRAs

Answer 23

Contribution plan; employees contribution tax deductible

Question 24

FSAs

Answer 24

Salary reduction employer contribution; annual maximum and use-or-lose rule

Question 25

Are individual disability income benefits taxable to the insured?

Answer 25

No. They receive income tax free by the insured

Question 26

Can employers deduct policy premiums paid for their employees as a business expense?

Answer 26

Yes. Premiums paid by the employer are tax deductible as a business expense.

Question 27

How are benefits received by the business tax under a key person disability policy?

Answer 27

The benefits received income tax free

Question 28

Disability income (Premiums & benefits)

Answer 28

Premiums - not deductible

Benefits - received income tax free