Vision Payroll

The Internal Revenue Code of 1986 as amended (IRC) provides in §106 for an exclusion from income for employer-provided health insurance that covers the employee, the employee’s spouse, the employee’s children, and the employee’s qualifying relatives. Prop. Treas. Reg. § 1.125-1(h), 22 Fed. Reg. 43937 (August 6, 2007) clarified that coverage for a former spouse who is not a dependent is not excludible from an employee’s income. Therefore, the fair market value of coverage for a former spouse is includible in an employee’s income for federal income tax purposes.

In the recently released, Working Draft Directive 09-XX, Personal Income Tax Treatment of Employer-Provided Health Insurance Coverage for an Employee’s Former Spouse, the Massachusetts Department of Revenue concludes that any income required to be included in federal gross income for coverage required under Massachusetts General Laws (MGL) shall be excluded from Massachusetts gross income. Coverage may be required for former spouses under the following laws, among others: MGL c. 176G § 5A, MGL c. 32A § 11A, MGL c. 175 § 110, MGL c. 176A § 8F, and MGL c. 176B §6B. Contact Vision Payroll if you have any questions on this Working Draft Directive.

If you got married or divorced and changed your name, be sure to give the changes to your payroll or HR department and to the Social Security Administration (SSA). This is true if you’ve changed your name to your spouse’s name, hyphenated your name with your spouse’s name, or changed your name to a previous name after a divorce or separation. If the name on your Form W-2 doesn’t match the name on file with the SSA, there may be a problem posting your earnings record to your social security account. Also, be sure not to include titles such as Dr. or Atty. and suffixes such as Jr. or Sr. with the name you provide to payroll or HR unless they are also listed on your social security card.

To change your name with SSA, file Form SS-5, Application for a Social Security Card, with the SSA. This is also a good time to make sure your spouse files Form SS-5, if necessary and also that any children who may have changed their name due to the marriage or divorce do so as well.

Vision Payroll strongly recommends that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.