The IRS requires that employees be taxed on the value of group term life insurance in excess of $50,000. The taxable value of this coverage is called imputed income. The income is “imputed” in that employees did not receive the premium amount, but rather received coverage, the value of which represents income. The IRS applies a value to this excess coverage using an age-rated formula and that value becomes taxable income which needs to be shown on employees’ Form W-2.
If you’re not sure that you are in compliance with this IRS requirement, we can show you how to calculate the imputed income for each employee.