Excerpt: This notice provides guidance regarding the effect of the Working Families Tax Relief Act of (WFTRA), Pub. L. No. , On November 17, , the Internal Revenue Service (“IRS”) published Notice (“Notice”), clarifying some confusion over the definition. (IRB ) Corporate distributions of property; distribution by subsidiary Notice (IRB ) Notice withdrawn; IRS to continue.

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Massachusetts General Laws show more show less. Generally, with respect to the personal notic tax, Massachusetts adopts the Code as amended and in effect on January 1, This TIR focuses on the instances where a child of a taxpayer who is not a “qualifying child” may be a “qualifying relative.

However, for federal income tax purposes, the value of health insurance benefits for a child of an employee is treated as imputed income in cases where the child does not qualify as a dependent under IRC section In Notice, C.

So a child may qualify as a dependent for purposes of the exclusion from gross income for employer-provided health insurance benefits whether or not the parent actually claims the dependency exemption for the child on the parent’s federal income tax return.

Text of IRS Notice on Definition of ‘Dependent’ in Group Health Plans (PDF)

As explained in TIRwhether a child of an employee is a dependent for purposes of the federal exclusion from gross income of employer-provided health insurance coverage is notoce question of federal income tax law pursuant to Internal Revenue Code section Employer-provided health insurance coverage is a fringe benefit.

The Massachusetts Health Care Reform Act at chapter 58 of the Acts ofas amended, changed chapters 32A,A, B and G of the General Laws to noitce a broadening of dependent coverage offered by health insurance carriers. This TIR provides a summary of Internal Revenue Service Noticea federal notice that provides relief from imputed income in many instances where employer-provided health coverage includes an employee’s grown child.


Section a of the Code provides that gross income of an employee does not include employer-provided coverage under an accident or health plan. The gross income of an employee does not include contributions which his employer makes to an accident or health plan for compensation through insurance or otherwise to the employee for personal injuries or sickness incurred by him, his spouse, or his dependents, as defined in section In the context of employer-provided health insurance benefits, the following examples illustrate when imputed income occurs and when it does not.

The father is a Massachusetts resident. The term “imputed income” is sometimes used to refer to the value of a noncash fringe benefit an employee receives where federal law requires the 0204-79 of the fringe benefit to be included in the employee’s gross income. Although this TIR provides general guidance, an employer or an employee seeking a case-specific determination on federal imputed income must contact the Internal Revenue Service.

The child is supported by both his parents. As a result, Massachusetts will not follow federal law in the area of imputed income resulting from employer-provided health care fringe urs.

Skip table of contents. Although generally Massachusetts follows federal law in the area of noncash fringe benefits, in the case of imputed income with respect to employer-provided health insurance, the Legislature has chosen to depart from the federal treatment.

However, pursuant irss G. Pending specific guidance from the Internal Revenue Service, an employer must determine the amount of imputed income attributable to the health insurance coverage of an employee’s nondependent child under valuation principles articulated in federal income tax law.

If a child does not meet the definition of dependent for these purposes, the value notlce the health coverage for this individual will be imputed as income to the employee for federal income tax purposes.

As a result of extended employer-provided health insurance coverage for children “under 26 ird of age or for 2 years after the end of the calendar year in which such persons last qualified as dependents under 26 U. The exclusion from Massachusetts gross income under G.


This can happen, for example, when the child is over age 24 or is emancipated. The purpose of this fact sheet is to provide general guidance on the federal and Massachusetts treatment of employer-provided health insurance coverage lrs an employee’s child.

IRS Notice 2004-79 Clarifies WFTRA Confusion

Massachusetts Department of Revenue Referenced Sources: Accordingly, under Internal Revenue Service Noticean employee may exclude from gross income the value of employer-provided health insurance coverage for a child who, while not a “qualifying child,” meets the definition of a noticce relative” determined without regard to the child’s gross income. Under federal tax law, employer contributions for health insurance are excluded from an employee’s gross income.

Jotice employee’s federal gross income for the year, as reflected in his or her W-2, will be higher and this higher amount will be subject to taxation and withholding. Any child to whom section e applies shall be treated as a dependent of both parents for purposes of this subsection.

When does employer-provided health insurance coverage for an employee’s child result in imputed income to the employee? As a result of the expanded coverage required by the Massachusetts health care reform law, the child is included in the parent’s employer-provided health insurance coverage. Please do not ontice personal or contact information. The extent to which a particular fringe benefit is excluded from gross income depends on the Code provisions that apply to the benefit.