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Posted by Arthur Kamlet on November 20, 2009, 5:05 pm
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>I am receiving W2 from a disability insurance company for money they
>did not pay me and they refuse to change it. The situation is as
>follows. I was receiving long term disability payments from an
>insurance company until my Social Security was approved and I received
>a lump sum for back pay from Social Security, my son was also entitled
>to benefits but turned 18 by the time the lump sum payments were paid.
>The payment made to him was under his social security number and he
>received a form SSA-1099 in his name making him responsible for the
>taxes. My LTD insurer demanded that I repay both lump sum amounts and
>when I refused they stopped paying me which they could do according to
>the policy. They are witholding my benefits until both amounts are
>repaid even though my son was an adult and the money was paid in his
>name. Instead of sending me a statement every year showing the amount
>of money they have recouped each year that I paid taxes on in a
>previous year they continue sending a W2 as if they are paying me and
>I have received nothing for the time the W2 covers. I called the IRS
>and complained and the company was sent a request to correct the W2
>but they have not and refuse to do so. I followed the instructions
>given to me by the IRS and filled out a form 4852 and sent it with my
>taxes. I paid taxes on the money received from Social Security as well
>as the money received in previous years from the Insurance company and
>should now be able to deduct the amount of money the insurance company
>is now recouping as an overpayment. The insurance company has
>continued filing W2s with the sick pay box checked as if they are
>still paying me. How can I stop them from doing this as I shouldn't
>have to pay taxes on money I am not receiving because I already did in
>previous years. Thanks for any advice.
This is a nasty situaion which is against you in many ways.
You had to make a repayment when you fully expected to be able to
keep the money. In efect you had to repay the company so it
in turn could repay social security.
The company is deemed to have made payments to you, as the payments
were available to you for the taking. And then for the repaying.
By not cooperating with them, you did not change the fact the money
was constructively offerred and received even though you never
took it.
You entered the world of Repayments of income, and if thhe repayment
was more than $3,000 you have a "claim of right" to seek tax relief.
You Substitute for a W-2 to try to say the 3rd Party Sick Pay income
was never received should not be accepted by the IRS as it was made
constructively available to you, even though it later had to be
repaid.
And unfortunately you cannot just reduce the repayments from the
income because, well, maybe because that would be too logical and
simple, and neither term applies to much of the tax code.
But this occurs so often the IRS has a pretty good description of
how you should treat Repayments on your tax return (and of
course you are expected to treat the reported third party sick pay
as taxable income.)
See Repayments http://www.irs.gov/pub/irs-pdf/p525.pdf in Pub 525,
and the discussion of how to get tax relief based on your Claim of
Right, either as a tax credit or as an itemized miscellaneous
deduction not subject to the 2% of AGI reduction.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
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