Question

Shirley received $500 monthly sick pay under a welfare fund and $6,500 monthly under a disability insurance policy offered by her employer on which she paid the premiums. How much, if any, of the $7,000 monthly benefits would be taxable to her?
A)$0.00

B)$500.00

C)$6,500.00

D)$7,000.00

Answer 1

Answer:

Total taxable amount will be equal to $7000

So option (d) will be correct answer

Explanation:

According to  IRS benefit which is received under the disability which shall be fully taxable only if

Employee pays premium on such policy entirely with pre tax dollars

Here in the given question premium amount paid by employee herself and with the assumption of paying such premium with pre tax dollars hence it is treated as taxable fully i.e 6500$

So 500$ sick pay under welfare fund is treated as earned income so fully taxable.

Therefore total taxable amount will be equal to $6500 + $500 = $7000

So option (d) will be correct answer