Expert: Arthur Naman - 9/27/2008

Question
I recently began receiving my insurance benefits at work and was surprised to see around twice the amount of taxes being withheld. Looking closer i saw an extra section of wages - imputed wages - because of my domestic partner being on my insurance. To my understanding this is how it is done unless the domestic partner is a dependent which mine is. I confirmed that they were marked as a dependent with my benefits department, but i cannot seem to get anyone to fix the error. Is my understanding of the imputed income issue wrong? If not who should i be contacting. It has been five weeks of this extra money being taken out and i am constantly playing catch up.

Answer
First, I am not sure a domestic partner can qualify as a dependent. I have not reviewed the relevant IRS documentation to determine if a "dependent" means only a "different sex married spouse" and qualifying child. I suspect it does from what I briefly read before answering this question, but I did not read any authoritative documents regarding this question.

If there is a question, your employer (HR person I presume) is the person to take up this issue with.

Your employer has to answer to the IRS if this is treated incorrectly, so your employer is the place to go to resolve this payroll problem.

If you disagree, you may have to do the research yourself, or perhaps hire a CPA or attorney to review the situation, so that you may then present your side of the issue in more detail to your employer.

Additional info:

The question of whether or not a person qualifies as a dependent is as described in IRC Sec. 152.

If your partner meets those tests, then that person should qualify as a dependent and your employer should have to revise their records to reflect that status.

However, as suggested previously, you might have to seek the assistance of a CPA or attorney to support your position to your employer.

Hope all this helps.