As explained in another question, my employer is listing the amount they paid towards my domestic partner's health insurance as imputed income. However, the internet, and two accountants I spoke with, said that it should not count as imputed income as long as my partner qualifies as a medical dependent. She does. Unfortunately, I've been told that the only way to recover that money from the government is to get a corrected W-2 from my employer.

I spoke with my employer about this at length, and they are not budging. They report this imputed income on all domestic partner health plans, period. I don't believe this is malicious; I think that they feel that they are complying with the IRS guidelines and don't want to stray away into territory that they feel is risky. My accountant suggested that my only course of action is to submit a complaint with the IRS stating that my employer has provided an incorrect W-2 and that they refuse to correct it.

I am very happy at this job and do not wish to risk it, even for an annual pay decrease of $1k / year due to this issue. I'm unsure if my submitting a complaint with the IRS will lead to an extra 5 minutes for my payroll department to modify a line item, or if it could spark a more serious audit of my employer that could cost them substantial time and money. Obviously, I wish to avoid the latter and any risk to my job that it may entail. I also don't exactly want to go through the hassle of an audit myself. But I would hate to lose potentially tens of thousands of dollars over the coming years if this really is a "checkbox on a line item" thing.

So what are the actual repercussions to me and my employer if I submit such a complaint? Does it increase my or their chances of an audit?

  • 2
    No one here yet was able to post a definitive answer on your other question as to whether or not your employer was correct. You've already made your position clear to your employer, and they have made theirs clear to you. (They do have accountants advising them, just as you do.) The question of how your employer will react to hearing from the IRS over this dispute with you is probably better suited for Workplace.SE. I don't know if this will increase anyone's chances of a full-blown audit, but at the very least it will result in contact from the IRS. – Ben Miller - Remember Monica Feb 11 '18 at 18:40
  • you say "you've been told ... to get a corrected W2", but not by whom. If you contact the IRS and ask about the specific tax code, they may at least be able to point you in the right direction for the information you can then bring as backup to your employer. – Jbowman Sep 29 '18 at 14:56

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