Hello -
I quit my job with a company in May 2015. I was not on their payroll since then.

Recently I received a W2 from this company for 2016 for around $3k. I neither worked for them in 2016 nor did I receive any payment from them.

It has been hard to get them to explain this. There is no phone number where I can reach them and after several email follow ups I received the following response-

"The W2 has been generated for gross wages processed towards imputed income on 12/31/2016, please refer the paystub and let us know incase of any clarification. Imputed income Health is the taxable benefit for domestic partner insurance coverage. The amount is added to earnings, taxes are calculated on total earnings, then the same imputed income amount is deducted because we do not want to ?pay? the associate, only calculate and deduct taxes. "

However I don't understand what this means. I have no payment and pay stub from this company in 2016.

Do I still need to report this income in 2017? The interesting thing is taxes withheld are 0 so it is significantly affecting my return.

Basically, the premiums for the domestic partner are imputed income to you, it is imputed income on employer-provided health insurance for non-spouse partners; the employee aslongas the premiums are paid by your employer and premiums you are required to pay for the domestic partner coverage must be taken from your paycheck on an after tax basis;aslongas pretax is used and then that income is imputed as well. the Fed Govt tax laws do require the employer contribution to be included as income to the employee. Income tax and payroll (FICA) tax must be withheld on this imputed income, even though the employee won?t receive any additional cash wages
For example, say, S and J are unmarried domestic partners. S?s employer, P Inc., provides health insurance coverage for both S and J at no cost. Assume P, Inc. pays $10k a year for S?s coverage and $10k a year for J?s coverage. Under the law, S?s coverage is tax-free but J?s is not since she is neither S?s spouse nor her dependent. The difference between the value of J?s coverage ($10k) and the cost paid by S ($0) is taxable income to S. This $10kof imputed income is included on S?s W-2 and is subject to federal and payroll tax withholding, which could cost S up to $4,725 of tax. Had S and J been in a legal marriage recognized by the federal government, none of the coverage would be taxable.

Thanks for taking the time to respond however I am still confused. In the example you have mentioned I think S and J have to be employed by employer P and S and J should be domestic partners but not legally married. This partly holds good in my case since my partner and I both worked for P in 2015 but we were and still are in a legal marriage. My spouse continues to work for P while I took employment with Q in May 2015. I also switched my spouse as a dependent on the health insurance with employer Q in 2015. My spouse only has dental coverage with P on which I am added as a dependent so that we have dual dental coverage. Based on what you are saying my spouse can likely get imputed income on the W2 received from P for dental coverage (although we are in a legal marriage and this should still not apply), what has happened though is I have received a W2 from P for 2016, not my spouse.I don't see how they would have provided me any benefits in 2016.

Thanks for taking the time to respond however I am still confused. In the example you have mentioned I think S and J have to be employed by employer P and S and J should be domestic partners but not legally married. This partly holds good in my case since my partner and I both worked for P in 2015 but we were and still are in a legal marriage. My spouse continues to work for P while I took employment with Q in May 2015. I also switched my spouse as a dependent on the health insurance with employer Q in 2015. My spouse only has dental coverage with P on which I am added as a dependent so that we have dual dental coverage. Based on what you are saying my spouse can likely get imputed income on the W2 received from P for dental coverage (although we are in a legal marriage and this should still not apply), what has happened though is I have received a W2 from P for 2016, not my spouse.I don't see how they would have provided me any benefits in 2016.

Thanks for taking the time to respond however I am still confused. In the example you have mentioned I think S and J have to be employed by employer P and S and J should be domestic partners but not legally married. This partly holds good in my case since my partner and I both worked for P in 2015 but we were and still are in a legal marriage. My spouse continues to work for P while I took employment with Q in May 2015. I also switched my spouse as a dependent on the health insurance with employer Q in 2015. ====>then, had S and J been in a legal marriage recognized by the federal government, none of the coverage would be taxable. The IRS has determined that employment-based health benefits for domestic partners or non-spouse cohabitants can be excluded from taxable income only if the recipients are legal spouses or legal dependents.S and J go ahead and tie the knot the whole issue is avoided going forward since J will now be considered S?s spouse, making her/his health insurance coverage from P tax-free. Either S or J needs tobe employed ; asfaras I know,both S and J do not need to be employed by the ER P.as said basically, an EE can exclude from income the cost of ER-provided coverage under an health plan for the EE, his or her spouse and dependents. However, for coverage provided to someone other than the EE?s spouse or dependents, the difference between the value of the coverage and payments made for the coverage must be included in the EE?s , as said previously, gross income. This is often referred to as imputed income and has affected same-sex couples for years based on the IRS?s prior position that same-sex partners, even those who were legally married, were not ?spouses? under the law.ALSO, Income tax I mean federal w/h tax, FICA tax must be withheld on this imputed income, even though the EE won?t receive any additional cash wages.however,due to the new rulings, same-sex couples that were legally married in prior years, but were required to impute income on health benefits since the federal government didn?t recognize their marriage, may be able to amend their returns. Had S and J been married while P provided the taxable health insurance, they could go back to any years still open under the SOL and amend their returns to request a refund for the income tax paid on the amt of imputed income. So, their ER should have taken steps to secure payroll tax refunds for any period where the statute of limitations remained open.


My spouse only has dental coverage with P on which I am added as a dependent so that we have dual dental coverage. Based on what you are saying my spouse can likely get imputed income on the W2 received from P for dental coverage (although we are in a legal marriage and this should still not apply),===Correct UNLESS you are in a legal marriage.So, it should not apply as mentioned above since yu were in a legal marriage as a legal spouse.

what has happened though is I have received a W2 from P for 2016, not my spouse.I don't see how they would have provided me any benefits in 2016.==>>Sorry, I am not pretty sure why the former ER issued you a W2. I guess you need to contact the HR dept of the ER. In general, when an EE and the EE?s spouse are both insured as full-time EEs , then, each must be insured individually. Either or both spouse may elect health coverage for dependents.

Thanks once again for your time. I finally heard back from the company. This time they confirmed that the imputed income is related to unsubstantiated claims from my 2015 Health FSA account with WageWorks.

What is still not clear to me is the unsubstantiated claims totaled only $700 while the W2 reports close to $3k. I have reached out to the Payroll dept for clarification.

I am also not sure if the company can legally report 2015 imputed income on 2016 W2. Any thoughts?

Here is the response I received from the employer:

"The imputed income is related to unsubstantiated claims related to your 2015 Health Care FSA account. WageWorks has confirmed that there was a total of $700 that needed to be substantiated in 2015; since this amount was not substantiated we are required to add this amount as imputed income in accordance with IRS regulations. Employer does not have access to the claims history, therefore you will need to contact WageWorks to view which amounts were not substantiated.

All companies offering Health Care Flexible Spending Accounts must abide by the regulations set by the IRS on how to treat pretax dollars taken, therefore, no further action can be taken.

We can confirm the Associate did not have a Domestic Partner enrolled in their benefits, however, we can confirm imputed income did apply to unsubstantiated 2015 FSA claims."

Is it legal to report 2015 imputed income on 2016 W2?

No; in common sense, You can not include a 2015 W-2 on your 2016 tax return. That has to be reported on an original or amended 2015 tax return.

My former employer says they failed to report unsubstantiated 2015 FSA claims on 2015 W2. Hence they reported this on 2016 W2 when I was not even on their payroll. They are saying no further action can be taken. I assume this is not legal. What are my options?