Aflac claim and taxes question

[Anonymous]

This may be a question for an accountant.

So I had an Aflac STD policy that I fully paid for but that my company deducts the premiums for me PRE-TAX. I know having the premiums taken out pre-tax isn't that smart, since then I have to pay taxes on any claims that are paid (but actually it has worked out in my favor since total claims paid were much less than premiums paid and we have cancelled the policy now).

Anyway, I had a claim that was paid in 2014 when I was on maternity leave. Aflac took out social security and medicare. They sent me a piece of paper which laid out the medicare and social security deductions. They did not send me a 1099. When we turned over our documentation to our accountant, he wants a 1099, of course, because I haven't paid any income tax on that income I received.

I called AFLAC three times, had it escalated to various people, who all swear they legally do not have to provide me a 1099 since they already took out taxes. My accountant claims that is illegal for them to refuse to issue this document. Finally after things getting heated they provided me with their EIN number, so I think my accountant will be able to proceed.

Does anyone know who is right here? I asked the supervisor how he thought I could pay income tax on that income without an appropriate tax form, and he seemed to not understand that there was a different between Social Security/Medicare and income taxes. What am I missing?

[Anonymous]

It sounds like they did not deduct federal or state taxes, but even so you likely should have received a 1099 as you had medicare and SS deductions taken out.

[Anonymous]

OP here - yes that is correct. They seem to not recognize that I need to pay state/federal taxes at all, and it is very clear that what customer support has been trained to tell people is that the company does not produce 1099's ever, for anyone, and that the reason is that they already take out SS/Medicare. I was told the exact same thing by 5 different people there. Totally baffled at how they are getting away with it. Our accountant is basically mocking up a 1099 in order to be able to include the income on our tax form.

[Anonymous]

Did AFLAC pay you directly? With my STD the payment came though my company's payroll system and was therefore included on my W2.

[Anonymous]

OP here.... Aflac paid me directly, the payment of the claim did not go through my company's payroll.

[Anonymous]

Tell your accountant to use the document provided by aflac, he needs to chill out.

[Anonymous]

When I ran my own shop, I paid for short-term disability, so my employees disability benefits were fully taxable. While the payments were handled by the insurer, they gave me the data to report the disability payments made and taxes withheld. I needed those reports to pay for the employer share of FICA (Social Security and Medicare) and federal and state unemployment taxes. I included the STD payments in the W-2 for the employee.

So my understanding is that the responsibility for tax reporting is on your employer even though the payments were made by AFLAC. If so, AFLAC does not owe you any tax information and you shouldn't report the AFLAC document for tax purposes. The statement they sent you about FICA deductions was only for your information. Check with your employer and ask if they included your short term disability payments on your W-2, as they would with other sick leave.

No need to pay taxes twice on those disability payments!

[Anonymous]

Anonymous wrote:When I ran my own shop, I paid for short-term disability, so my employees disability benefits were fully taxable. While the payments were handled by the insurer, they gave me the data to report the disability payments made and taxes withheld. I needed those reports to pay for the employer share of FICA (Social Security and Medicare) and federal and state unemployment taxes. I included the STD payments in the W-2 for the employee.

So my understanding is that the responsibility for tax reporting is on your employer even though the payments were made by AFLAC. If so, AFLAC does not owe you any tax information and you shouldn't report the AFLAC document for tax purposes. The statement they sent you about FICA deductions was only for your information. Check with your employer and ask if they included your short term disability payments on your W-2, as they would with other sick leave.

No need to pay taxes twice on those disability payments!

This is what happened to me with my company's STD policy (not AFLAC). While the insurer paid me directly my employer included the information on my W-2. So I did not receive an additional form from the insurer to report any tax that had been withheld.

[Anonymous]

Anonymous wrote:When I ran my own shop, I paid for short-term disability, so my employees disability benefits were fully taxable. While the payments were handled by the insurer, they gave me the data to report the disability payments made and taxes withheld. I needed those reports to pay for the employer share of FICA (Social Security and Medicare) and federal and state unemployment taxes. I included the STD payments in the W-2 for the employee.

So my understanding is that the responsibility for tax reporting is on your employer even though the payments were made by AFLAC. If so, AFLAC does not owe you any tax information and you shouldn't report the AFLAC document for tax purposes. The statement they sent you about FICA deductions was only for your information. Check with your employer and ask if they included your short term disability payments on your W-2, as they would with other sick leave.

No need to pay taxes twice on those disability payments!

y


This is the OP. Maybe this is what happened! I'm going to check with payroll tomorrow thanks!

[Anonymous]

OP back, checked with our payroll person today, who says they received nothing from AFLAC at all about my claim. The mystery continues.

[Anonymous]

First, try to get your employer to account for the income properly and give you a corrected W-2. Your employer is liable for not paying their share of your Social Security, Medicare, and unemployment taxes plus hefty penalties. The problem for you is if that the underreporting could impact your Social Security benefits.

From an income tax perspective, it is much easier to just file using the W-2 you were given. If you want to be super safe, just add the STD benefits as additional income and pay the taxes accordingly.

But, the chances are that the IRS will never be able to figure out your W-2 is incorrect unless your employer fixes it. Then, you will need to pay the additional taxes plus interest, but not a penalty. So you can take your chances and go with the flow.

[Anonymous]

you do not have to pay taxes on a payout for a claim