IRS Addresses Taxation of Fixed Indemnity Benefits

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The Internal Revenue Service (IRS) has released an internal memorandum addressing the tax treatment of payments from fixed indemnity health coverage.

According to this guidance, if an employee is not taxed on the premiums for fixed indemnity health coverage (the premiums are paid by the employer or by employees on a pre-tax basis through a cafeteria plan), any payments from the coverage must be included in the employee’s gross income and wages. These same rules also apply to wellness programs that provide fixed indemnity benefits for engaging in wellness activities.

To learn more, read the full Compliance Bulletin: IRS Addresses Taxation of Fixed Indemnity Benefits