Question

Employee Fringe Benefits Julie lost a hand in a car accident (on her own fault) that caused her to miss work for 6 months. The car accident was unrelated to her work. The accident and health insurance policy was purchased (carried) by Julie’s employer. The premiums paid by Julie’s employer were $2,000. Julie received $6,000 on an income replacement policy purchased by Julie’s employer. Finally, Julie collected $30,000, a payment for loss of a hand, according to the insurance policy. How much should be included in Julie’s gross income? Please Explain briefly

Answer 1

Any fringe benefit provided o an employee by an employer is taxable in the hands if the employee, unless the tax law permit it as exemption. Such benefit received should be included as income of the employee.

However, there are a list of tax-free fringe benefits where it need not be included in the recepient's compensation. And the list includes accident insurance also. Therefore the amount received by Julie $30,000 as a payment for loss of hand according to the insurance policy is excluded in the income of Julie.