Tax implications of Domestic Partner vs Spouse on health insurance for W-2 reporting

This is actually a common issue! When you add a domestic partner to your health insurance, the IRS considers the value of their coverage as taxable income to you (called "imputed income"), which is why it's showing up on your W-2. However, once you're legally married, the value of your spouse's coverage is no longer taxable. Since you got married in April 2024 and properly notified your employer, they should have only included the imputed income for the months when you weren't married (January through April). The fact that they continued adding it for the entire year is an error that needs to be corrected. You should contact your payroll or benefits department immediately and request a corrected W-2 (called a W-2c). Explain that you were married in April, submitted the proper documentation, and the imputed income should have stopped at that point. They'll need to recalculate the correct amount of imputed income (only for January-April) and issue you a corrected W-2.

After dealing with a similar issue last year, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much stress! I uploaded my W-2, paystubs, and marriage certificate, and it automatically identified the imputed income discrepancy and helped me figure out exactly how much should have been reported vs. what was actually on my W-2. The analysis showed me exactly which months should have had the domestic partner imputed income and which months shouldn't have, making it super clear what needed to be fixed. It even generated a letter I could send to my HR department explaining the issue with all the relevant tax code references. My employer issued a corrected W-2 within two weeks!

Just wanted to update - I tried taxr.ai after reading about it here and it was seriously helpful! I had a similar issue with domestic partner benefits continuing after marriage but also some HSA contribution reporting errors. The analysis broke everything down clearly and showed exactly where the discrepancies were. The tool created a detailed report showing that my employer had overreported my income by about $8,200 due to continuing the imputed income after marriage. I sent the report to HR with the letter it generated, and they immediately acknowledged the error. Got my W-2c within 10 days and filed my taxes correctly. Saved me about $2,700 in taxes I would have overpaid!

If you're having trouble getting your employer to respond quickly on the W-2c, you might want to try Claimyr (https://claimyr.com). I was in a similar situation last year where my employer kept delaying issuing my corrected W-2, and I needed to talk to someone at the IRS about my options. I spent days trying to get through to the IRS directly with no luck - constant busy signals or disconnects. Claimyr got me connected to an actual IRS agent in about 15 minutes! You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained that I could file Form 4852 (Substitute for W-2) if my employer didn't provide a corrected W-2 in time. They walked me through exactly how to fill it out based on my specific situation with the imputed income issue.

I need to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway since I was desperate to talk to the IRS about a similar imputed income issue. The service actually got me connected to an IRS representative in about 20 minutes! The agent confirmed that imputed income for domestic partner benefits should stop once you're legally married and proper notification is given to your employer. They suggested I request a corrected W-2 from my employer, but also explained that if my employer refused or took too long, I could file Form 4852 (Substitute for W-2) along with documentation showing when I was married and when I notified my employer. This saved me so much stress and potentially thousands in overpaid taxes. I'm genuinely impressed and apologize for my skepticism.

This happened to me last year! Another important thing to remember is that if you file jointly, you'll need to reconcile this with your spouse's tax documents as well. Since you're both now filing as "married filing jointly," make sure any tax documents your spouse has (W-2s, 1099s, etc.) also reflect the correct filing status. In my case, my spouse had some 1099 work and was making quarterly estimated tax payments as "single" for part of the year, and we had to sort that out as well. Just something else to keep in mind!

One more thing to consider - if your employer won't issue a W-2c quickly, you can also file your return with the original W-2 but attach an explanation that subtracts the incorrect imputed income. Use Form 8275 (Disclosure Statement) to explain the discrepancy. I did this last year while waiting for my corrected W-2, and my return was processed without any issues. Just make sure to clearly explain why you're reporting less income than what's on your W-2, and attach documentation (marriage certificate, notification to employer, etc.) to support your explanation.

This is such a frustrating situation, but you're definitely not alone! I went through something similar when my company's payroll system didn't properly update my marital status after I got married mid-year. One thing I'd add to the excellent advice already given - when you contact your HR/payroll department, ask them to provide you with a detailed breakdown showing exactly which pay periods included the imputed income. This will help you verify that the corrected W-2c only includes the proper amount (January through April in your case). Also, keep detailed records of all your communications with HR about this issue, including dates, who you spoke with, and what documentation you provided. If there are any delays or pushback, having this paper trail will be helpful if you need to escalate or if the IRS has any questions later. The good news is that once this gets sorted out, you should see a nice reduction in your tax liability since that $16.5k in incorrectly reported income was being taxed at your marginal rate. Hang in there - this is definitely fixable!