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A Brief About Imputed Income & LTD on Your Paystub

imputed-income

Decoding a paystub is a hectic process for many particularly in spotting the imputed income and LTD (Long-Term Disability) on an employee’s Paystub. In general, most of the employees are well aware of reporting their regular wages and tax amounts during the taxation period. However, many will struggle to report other payment types like imputed income or LTD.

To spot down the imputed payments and long-term disability on your Paystub, first you need to understand what an imputed income and LTD means. This article briefs more about ltd imputed income this will help you to decode your Paystub easily and quickly.

What is Imputed Income?

Imputed income can be termed as the value of benefits or services which are generally known as non-cash employee compensation provided by the employer to employees. Sometimes, it may add value to the cash. The above-mentioned imputed income is considered and accurately reflected in the employee’s taxable income.

Decoding imputed income in a paystub is important for every employee to make insight or sound financial decisions. Imputed income is an added value or benefit provided by an employer to an employee. So, employers must include the imputed income in the employee’s gross wages instead of adding it to the employee’s net pay.

Imputed Income Types

In general, employers would always treat imputed incomes as extra income wages. So employees must add their imputed income as taxable income, unless this is a specific exemption. In most cases, imputed incomes are gained to determine child or spousal support as per the family’s legal disputes.  

Apart from that, several types of imputed incomes can add value and benefits to an employee. Take a look over the below-listed imputed income types.

  • Care Assistance
  • Group-term life insurance
  • Adoption assistance
  • Usage of vehicles provided by employer
  • Education assistance
  • Moving expenses
  • Fitness incentives

In the above-mentioned types care assistance will be permitted only if the allotted amount exceeds the tax-free amount. Also, for group-term life insurance imputed income will be calculated only if the amount exceeds $50,000.

In addition to that, there are a few more exception scenarios that will not be considered as the imputed income, the next section will be brief in detail. If you are managing your finances, make your own paystubs to keep track of earnings and deductions.

What Are Excluded from Imputed Income?

Well, the lists of fringe benefits listed as the imputed income that will be taxed are briefed clearly in the earlier part. This section briefs about the excluded benefits an employee can get from the employer along with the threshold or qualify scenario to be excluded from the imputed income.  

Here are the lists of excluded benefits from imputed income.

  • Dependent’s health insurance
  • Amounts transferred to health savings accounts.
  • Care assistance benefits below $5,000.
  • Group term life insurance benefits below $50,000.
  • Education allowance or assistance amount below $5,250.
  • Financial assistance for adoption which is well below the annually adjusted amount.
  • Gifts and vouchers offered by employers in the form of movie tickets, apparel, party tickets, and so on.

Why Is Imputed Income Deducted From Paycheck?

To understand why is imputed income deducted from your paycheck? You need to be aware that imputed incomes are fringe benefits provided by employers to employees which are referred to as the employee’s alleged income.

For calculating and accurately withholding employment taxes, almost all employers add the imputed income to the employee’s gross compensation instead of net compensation. This makes the imputed income of an employee one of the wages and it is a taxable amount. Owing to that reason, imputed incomes are deducted from an employee’s Paystub.

What is Long-Term Disability (LTD)?

Just like the imputed income, Long-Term Disability (LTD) is also a kind of fringe benefit that allows you to earn income in the event you incur an injury or severe illness. In simple terms, disability insurance can be explained as income coverage during the elimination period of conditions due to illness or injury. But it will not provide benefits if you miss a week or two due to a cold, and so on.

Well, here is the technical answer to the question, what is ltd on paystub?

It’s an insurance policy offered by employers to their employees which acts as an income replacement to the workers when they can’t or are unable to work for a long time due to their illness or injuries. It helps employees to tackle their financial goals during the illness or injury period.

To avail of this benefit, employees may pay around 1% to 3% of their annual income before tax to their LTD plan.

Bottom Line:

Understanding fringe benefits like imputed income and LTD on Paystub is essential for an employee to comprehend the protection of their financial well-being, to make informed financial decisions, and to secure the future of their family. Decoding all those paystub issues by an employee will ensure employers are paying them as per the guidelines published by the concerned authority and labor law.

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