Question 25

The cost of employer-provided group life insurance above $50,000 is taxable as income to the employee.

The cost of employer-provided group life insurance above $50,000 is considered a fringe benefit and is taxable as income to the employee. This means that any amount exceeding the $50,000 limit must be reported as income on the employee's tax return.

A) taxable to the employer.

This option is incorrect because the employer is not taxed on the cost of the life insurance provided to employees. Instead, the employer can often deduct the premiums paid for group life insurance as a business expense.

B) tax exempt to the employee.

This option is incorrect since the value of the employer-provided life insurance over $50,000 is not tax-exempt for the employee. Instead, any amount exceeding the limit is taxable as income.

C) tax deductible by the employee.

This option is also incorrect. Employees cannot deduct the cost of the employer-provided life insurance on their personal tax returns, as it is considered a fringe benefit.

D) taxable as income to the employee.

This option is correct because the IRS mandates that the cost of employer-provided group life insurance over $50,000 is treated as taxable income to the employee, and must be reported accordingly.

Conclusion

The correct answer is that the cost of employer-provided group life insurance above $50,000 is taxable as income to the employee, aligning with IRS regulations. All other options fail to accurately represent the tax implications of employer-provided life insurance, either misidentifying the tax responsibility or incorrectly stating the treatment of the benefit.