refusal to change incorrect W2

In misc.taxes.moderated, Seth wrote:


The insurance company in the example has sent him a W2 for $48,000 and another W2 for $24,000, for a total of $72000. They sent him only $48,000 total. Is that legal?
I assume the missing $24000 is not being paid by the insurance company to the Social Security Administration nor to the IRS.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
DF2 wrote:

No, they paid (are paying) $72K, but $24K of it was (is being) paid back, for a net of $48K over the two year period.

It's not "missing". Not sure what the insurance company paying SSA has to do with it.
It's no different than you getting a claim payment from your auto insurer after a collision, then later you get a payment from the other driver's insurance company, so you have to pay your company back per your insurance contract. That doesn't mean your insurance company is paying anything to the other insurance company.
-Mark Bole
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
In misc.taxes.moderated, Mark Bole wrote:

That $24000 never existed?

When you get a W2, some money has been paid to you in checks. Some has been paid to your account for income tax withholding, FICA, medical insurance, etc. But it has all been paid to somebody. In this case, much of the W2 total has not been paid, and was not offered to be paid, to anybody.
That W2 I assumeD also represents expense to the insurance company, that reduces their income tax. Now maybe it does not, and so the insurance company may not actually getting a windfall. I am inferring you are saying that the W2 does not necessarily represent an expense for the insurance company for income tax purposes.

The car insurance did not send me a W2, and the IRS did not consider the money as taxable income to me.
What stops the annuity insurance company in the case from issuing a corrected W2 for the earlier year? Would it be forbidden by law?
Suppose this person had converted an IRA to a Roth, and this phantom income drove him over the MAGI line?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
DF2 wrote:

No, they paid it to him. When SSA finally approved his claim and paid him a lump sum, he was obligated to pay the disability insurer back. He didn't. So they are taking it out of current payments.

He got the money in advance, if you will. He is now paying it back through garnishment, if you will, of his current payments.

It's a wash for the insurance company. $24K paid out, $24K refunded. The only windfall was to our OP, who got (using Seth's made up numbers), what amounts to a $24K interest-free loan against his future payments.

Like anyone else, he could recharacterize his conversion to undo it.
-Mark Bole
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
In misc.taxes.moderated, Mark Bole wrote:

I know you know that he is getting more income reported on his W2s and SSA-1099 than he got, however you allocate the money. So whatever the money reported as paid to him minus what he actually got is what I see as phantom money. You could call the difference what you wish.

Unlike everybody else with the same income (assuming certain levels other income that we could incorporate into the example), he would be forced to recharacterize.
I understand that you are describing the view of the law, and that you don't actually confuse that with reasonableness or fairness.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Their reasoning is that in 2009, they paid him $24,000, and he used it (involuntarily) to repay them the $24,000 he owed them (due to the SS back payment).

They should report the $24,000 as repaid by OP (just as if he'd sent them a check as soon as SS send him the $24,000).
Seth
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
In misc.taxes.moderated, Seth wrote:

So he has the same money on his AGI line for two years? Suppose he does not itemize.
Had he repaid the $24,000 with a check in 2009, would they have been obligated to give him a corrected 2008 W2?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
DF2 wrote:

He'd be foolish not to itemize if his itemized deductions, including the claim of right deduction, was greater than his standard deduction. But the alternative of a credit may be a better deal. The only way to tell is to run the numbers both ways.

No. Please go back and re-read the paragraph from Pub 915 that I previously posted.
-Mark Bole
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here. All logos and trade names are the property of their respective owners.

Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.