RUSH: Myrtle Beach, South Carolina. Derek, I’m glad you waited, sir. Welcome to the EIB Network.
CALLER: Thank you. Thank you for taking my call, Rush.
RUSH: Yes, sir.
CALLER: Just want to pass along something you’ve been warning us about is beginning to come to fruition, and that’s the taxation of job benefits as imputed income. I work for Ford Motor Company, and just on Monday we got a notice that beginning with our June paychecks, our life insurance benefits — due to IRS regulation changes — will now be taxed as imputed income. Step one.
RUSH: Whoaaaa.
CALLER: Yeah.
RUSH: Now, wait a second here. Now, this is not health benefits. This is life insurance.
CALLER: Yes, sir, this is life insurance benefits.
RUSH: Now, you’re more informed than I. I have not heard that this happened. You have a company benefit that pays you life insurance?
CALLER: Yes. Yes. That’s part of a flexible benefits package. We can purchase life insurance through the company.
RUSH: Oh, oh, oh. Okay. Flexible benefits package.
CALLER: Yeah. Yeah. But that is now going to begin to be taxed —
RUSH: Yeah.
CALLER: — as imputed income.
RUSH: I’m sorry. You know, I… Look, people tell me I’m out of touch, and sometimes I am.
CALLER: (laughs)
RUSH: The word ‘benefit’ is just not in my lexicon. When I hear ‘benefit,’ I think of who benefits if I do something well. But I don’t think of benefits in terms of something I receive. So, okay. You have flexible benefits and so you chose life insurance, and that income is going to be imputed and you’re going to pay taxes on it? They’re going to withhold it starting in June?
CALLER: That is correct.
RUSH: Hang on a minute. I gotta take a break. I want to make sure people hear what you have to say.
BREAK TRANSCRIPT
RUSH: I want to go back now to Derek in Myrtle Beach, South Carolina. You work for Ford. Is your benefit package something along the lines of they provide you a small amount of life insurance and then you have the option to buy more if you want?
CALLER: Yes, that’s absolutely correct.
RUSH: Regardless what your health conditions are?
CALLER: That is correct, yes.
RUSH: And so Ford sent you a notice starting this month that IRS regulations — read it to me. What’s it say?
CALLER: I don’t have it in hand, Rush, but what it said, due to IRS regulation changes, that they will have to begin taxing the life insurance benefit, the money that they spend on my life insurance benefit as imputed income.
RUSH: So that means your take-home pay will be reduced because they’re going to start withholding a percentage, they’ll impute the income to your gross —
CALLER: Absolutely. And my concern is, when are the health benefits, that’s gotta be coming next.
RUSH: Oh, that’s coming, Obama’s looking at that. I didn’t know this was coming, you caught me off guard here. And the reason I asked you about IRS regulations, the IRS can’t do this on their own. There has to be legislation out there, and I’ve missed it.
CALLER: Yeah, we just got an e-mail from our HR department on Monday.
RUSH: Now, Snerdley is shouting at me, it was in the Porkulus bill? Oh, okay. He’s speculating that it might be in the Porkulus bill.
CALLER: Very possible.
RUSH: Because nobody read the Porkulus bill. And, you know, Harry Reid has not read one single opinion of Sonia Sotomayor. Well, okay, cool. I imagine this is going to be happening to a lot of other people.
CALLER: Yes. I’m quite sure it will, and then once the health benefits become imputed, well, I’m sure our magnanimous government will be happy to lift that burden from the taxpayers.
RUSH: Well, your take-home pay is going to shrink, gasoline prices going up. What kind of gasoline allowance does Ford give you?
CALLER: Whatever I need to travel to my different dealerships.
RUSH: So they reimburse you for that.
CALLER: Yeah.
RUSH: Okay. That’s business.
CALLER: Yeah.
RUSH: So we got some tipping points out there that are going to hit. I gotta find this out. This is the kind of thing I normally know that they’ve done. This is the kind of thing that normally is reported somewhere, if not in the state-controlled media, some of our guys in the blogosphere and other places find this stuff out. If I have heard it, I forgot it, didn’t make much of an impression so I don’t think I forgot it. I’ll find out. It’s a research project, and given the research capabilities of my staff I’ll have the answer for you by Tuesday. If I do it myself I’ll have the answer for you tomorrow. Okay. I’m just kidding. Just kidding.
BREAK TRANSCRIPT
RUSH: I’ve been flooded with e-mails from payroll professionals. ‘Dear Rush: The cost of employer-provided coverage of life insurance greater than $50,000 has long been taxable. Example: If a person made $35,000 and life insurance is twice annual income, then $20,000 is taxable. Not sure what your caller is talking about for the month of June,’ and there are other e-mails. ‘This is nothing new. Now, it may be new to him only because the amount of life insurance he has or has decided to get, supplemental to what they’re giving. Maybe he’s now just entered the taxable range for the first time and that’s why he’s getting the notice.’ This is from ‘Judith — payroll professional.’ When somebody signs ‘payroll professional,’ you’re dealing with a pro. There are three or four others, just a bunch here that say the same thing. So that’s why I didn’t hear about it, not new.