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My wife earns a gross salary of $59,610 annually. However, her employer actually gives people an incentive to NOT take the health insurance plan by paying them 50% of what the employer's portion of the premium would be if they were to take the benefits. We get good health coverage through my job, so she opts for the 50% of premium on top of her regular salary. It of course goes up every year as the cost of premiums goes up. This year it came to $10,354 before deductions (all payroll taxes and other deductions are taken out). It makes a big difference in our DTI since with the healthcare payment factored in her gross is nearly $70K.
The question is, does this count toward her gross income, at least as far as FHA is concerned? I've gotten differing answers from different loan officers. Though payroll taxes are not taken out, it does NOT appear on her W2, which, according to two different loan officers, disqualifies it from being considered income. Another told me that if taxes are taken out and if it's paid out via a regular payroll check (which it is), it can be counted. The only thing I can find that comes close in the HUD guidelines is bonus and overtime income, but this seems to be a fairly unique situation. One final note-the payment is guaranteed to her in her contract (she is a public school teacher).
It's paid as a payroll check, but not on the w2? It's not going to count. If it was on the w2 it would...
However, are you claiming it as income on your tax return? They might count it as a second source of income if it's been coming in more than 2 years...
But still on the third hand, are you that hard-up to qualify for your price point that this $10k makes a difference? If not, don't worry about it as it will probably be a pain in your arse!
I just looked it up in the Fannie guide and do not see anything for opting out of insurance. ARE YOU CERTAIN SHE IS NOT BEING TAXED ON THIS INCOME? I would be real curious to see how this is 1) reflected on pay stub. 2)W2 and 3) HR handouts. If it is indeed tax free income and it's documented and consistent, it may even be able to be grossed up. In that case, the "income" counted would be $12,424. Keep pressing on this, it's not chump change when qualifying. Translated: This could add as much as 78K to your qualifying.
You stated payroll taxes aren't taken out are they or not? If it's not on her w-2 I wouldn't expect payroll taxes to be withheld
Quote:
Originally Posted by SmartMoney
I just looked it up in the Fannie guide and do not see anything for opting out of insurance. ARE YOU CERTAIN SHE IS NOT BEING TAXED ON THIS INCOME? I would be real curious to see how this is 1) reflected on pay stub. 2)W2 and 3) HR handouts. If it is indeed tax free income and it's documented and consistent, it may even be able to be grossed up. In that case, the "income" counted would be $12,424. Keep pressing on this, it's not chump change when qualifying. Translated: This could add as much as 78K to your qualifying.
There is some misunderstanding here. On top of her regular salary she receives the healthcare payment in the form of two payroll checks-one in June and half in December. The gross amount came to $10,354 (It goes up every year as the cost of premiums goes up) last year. From the gross amount the following deductions are taken:
Federal
State
FICA
Medicare
Other State
Pension
The net amount for each check last year was just under $3,000. However, despite the fact that federal taxes, state taxes, etc...are taken out of these payments, her W2 only reflects her regular gross salary of $59,610 annually. We can produce the check stubs for all of the healthcare payments going back three years (back to the beginning of her employment at that school) as well as the June stub for this year's payment. We can also produce the contract which entitles her to the payments.
There is some misunderstanding here. On top of her regular salary she receives the healthcare payment in the form of two payroll checks-one in June and half in December. The gross amount came to $10,354 (It goes up every year as the cost of premiums goes up) last year. From the gross amount the following deductions are taken:
Federal
State
FICA
Medicare
Other State
Pension
The net amount for each check last year was just under $3,000. However, despite the fact that federal taxes, state taxes, etc...are taken out of these payments, her W2 only reflects her regular gross salary of $59,610 annually. We can produce the check stubs for all of the healthcare payments going back three years (back to the beginning of her employment at that school) as well as the June stub for this year's payment. We can also produce the contract which entitles her to the payments.
Why isn't posted on her w-2 then? She is receiving compensation and being taxed as well as federal and state withholding. Something seems amiss either in your understanding of what's going on or how the company is handling it
There is some misunderstanding here. On top of her regular salary she receives the healthcare payment in the form of two payroll checks-one in June and half in December. The gross amount came to $10,354 (It goes up every year as the cost of premiums goes up) last year. From the gross amount the following deductions are taken:
Federal
State
FICA
Medicare
Other State
Pension
The net amount for each check last year was just under $3,000. However, despite the fact that federal taxes, state taxes, etc...are taken out of these payments, her W2 only reflects her regular gross salary of $59,610 annually. We can produce the check stubs for all of the healthcare payments going back three years (back to the beginning of her employment at that school) as well as the June stub for this year's payment. We can also produce the contract which entitles her to the payments.
How do you account for this money on your tax returns?
How do you account for this money on your tax returns?
Quote:
Originally Posted by Lowexpectations
Why isn't posted on her w-2 then? She is receiving compensation and being taxed as well as federal and state withholding. Something seems amiss either in your understanding of what's going on or how the company is handling it
I don't know why it doesn't appear on the W2-I hadn't even given it a thought until I started researching all of this. All I know is that in the box where her tips, wages, etc...are listed, the number reflects the amount of her regular annual gross salary-not gross salary plus the gross healthcare payment. I also know that the check stubs from the healthcare payments clearly indicate that federal and state taxes are taken out. As for accounting the money on the tax returns, we use an accountant and just hand everything to him at tax time, so since the money is not showing up on the W2, he doesn't even know it exists. Perhaps her HR Department is not handling this correctly? This is a small rural school district, so the "HR Department" is literally one person, the Superintendent's secretary.
I was genuinely curious about this, so I did a little googling. I'm not stating an opinion on this, other than you should call YOUR CPA to confirm that whatever the school district is doing, it is correct and that you do not need to amend your tax returns. (I suspect you do.)
What I suspect is happening is that the school is recording this money as a "stipend." If I am accurate, it should have been reported to your CPA and included as income on YOUR tax returns even if it isn't included in your W-2. I suspect the employer is treating this like a graduate student stipend. I don't know if that is the PROPER treatment or not.
Had you included the funds on your tax returns (which may need amending, btw), you should have been able to use it as income towards your mortgage.
Call your CPA as soon as possible. Since the tax was paid, it's unlikely you owe money to IRS (unless these funds dumped you into a higher tax bracket.)
I was genuinely curious about this, so I did a little googling. I'm not stating an opinion on this, other than you should call YOUR CPA to confirm that whatever the school district is doing, it is correct and that you do not need to amend your tax returns. (I suspect you do.)
Thanks for the information-definitely going to consult our accountant on this.
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