ody ody Q: I was laid off and as part of my severance package, my employer paid me for 2 months of COBRA. They taxed that money. Is that legal? If not, can you tell the tax code that it falls under so I can let them know?
A: COBRA premiums may be paid to the employee, and the employee would pay the insurance company directly. Since there is no guarantee that the employee will use the funds to pay the premiums, the funds are considered wages and subject to applicable taxes.
Because they can’t guarantee that that money will go to COBRA Continuation, they CAN tax that money.
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