The UAW negotiated a new Legal Service Plan Benefit in the last round of negotiations with FCA, Ford and GM. The benefits provided by the Legal Services Plan are fringe benefits that are taxable under the IRS Code. The Plan will be sending out a 1099 form to the over 600,000 UAW members that are eligible to receive the benefit. These members will have to include $17.30 on their Federal income return which will result in a minimal tax of $1.73 to $6.85. Below is a copy of the Q and A insert you will receive along with a 1099 form.
Why am I receiving this 1099?
As you know, the UAW negotiated a legal service benefit in the 2015 contract negotiations with FCA, Ford and General Motors and this benefit is available to certain eligible active workers and retirees and some surviving spouses. The UAW-FCA-Ford-General Motors Legal Services Plan opened on January 25, 2017. The benefits provided by the Legal Services Plan are fringe benefits that are taxable under the Internal Revenue Service Code. Prior to 1992 the money paid by your employer to run the Legal Services Plan was tax exempt to you. That tax exemption expired on June 30, 1992 and now the cost of those services must be taxed to the eligible members.
How do you determine the amount of income?
The Legal Services Plan follows IRS guidelines for imputed income on taxable fringe benefits. In our case, the costs to provide the legal services benefit to eligible members for the year are totaled and divided by the number of all eligible members. The income must be reported by all who are eligible for the benefit regardless of the use of the benefit.
How much will the tax on the Legal Services Plan cost me?
It depends on your tax rate but it will be less than the amount listed on the 1099. The amount you will pay in taxes will be based on your tax rate, currently ranging from 10% to 39.6%. Therefore, you will owe between $1.73 to $6.85 in federal taxes. Please understand that you should enter the amount listed on the 1099 ($17.30) on your federal and state tax returns as miscellaneous income. You may wish to discuss this further with your tax preparer.
What legal services are covered by the Plan?
The Legal Services Plan offers a variety of office legal services such as preparation of wills, trusts, powers of attorney, deeds, residential real estate documents, credit reporting problems and uncontested divorce and family matter documents. It also provides advice and assistance in consumer contract matters, birth and marriage certificate matters and other uncontested matters regarding residential real estate. It also can provide a low-cost referral to a private attorney for many other personal legal matters not covered under the office work benefit.
How do I use the Legal Services Plan benefit?
Simply call the Legal Services Plan at 1-800-482-7700. Your eligibility will be verified and the level of benefits explained to you. If you are eligible and the matter is covered for office work or for a low-cost referral, you will be referred to an attorney who can assist you. The Plan is generally open Monday through Friday, 9:00 am to 5:00 pm EST.