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Figure Out Tax Perks of Group Term Life

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in Employee Benefits Program,Human Resources

Q.  I am starting work for a second employer while retaining my existing job. Both companies provide group term life insurance coverage. Does the $50,000 tax-free limit apply to each one?

A.  No. An employee may receive up to $50,000 of employer paid, group term life insurance as a tax-free fringe benefit. Any excess is taxable to employees under IRS-prescribed tables. This $50,000 tax-free cap applies to total coverage from all employers that provide simultaneous coverage. If two or more employers provide insurance coverage exceeding $50,000, the amounts reported as wages on your W-2s for 2008 will be too low.

Tip: You will have to correct any errors when you file your return. See IRS Pub. 17, page 49, at www.irs.gov/pub/irs-pdf/p17.pdf for more details.

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