What Does G.T.L. Mean on My Paycheck?

Unfamiliar acronyms on a paycheck can often cause confusion, and “G.T.L.” is a common example. This entry represents an important aspect of an employee’s benefits and tax obligations. Understanding what G.T.L. stands for, why it appears on a paystub, and how it impacts an individual’s take-home pay and taxes can help clarify this common payroll item.

What G.T.L. Represents

G.T.L. stands for Group-Term Life insurance. This type of life insurance is provided by an employer to a group of employees. It offers financial protection to an employee’s beneficiaries in the event of the employee’s passing while covered.

Employers offer group-term life insurance, sometimes covering the full cost of the premiums. The coverage amount might be a flat rate or a multiple of an employee’s annual salary. This benefit remains active as long as the individual is employed by the company.

Why G.T.L. Appears on Your Paycheck

While employer-provided group-term life insurance is a benefit, its value can be considered taxable income by the Internal Revenue Service (IRS). The cost of coverage exceeding $50,000 is subject to taxation. This taxable value is known as “imputed income.”

Imputed income refers to a non-cash benefit the IRS treats as if the employee received cash. The value of the excess group-term life insurance coverage is added to an employee’s gross wages. This inclusion ensures appropriate payroll taxes are applied, leading to G.T.L. appearing on a pay stub.

Calculating the Taxable G.T.L. Amount

The IRS provides guidance for employers to determine the taxable value of group-term life insurance coverage that exceeds the $50,000 exclusion. This calculation uses an age-based table, found in IRS Publication 15-B. The table provides a cost per $1,000 of coverage for one month, based on the employee’s age.

To calculate the imputed income, the employer identifies the amount of coverage exceeding $50,000. This excess amount is divided by $1,000 and multiplied by the corresponding cost factor from the IRS table for the employee’s age. For instance, if an employee has $100,000 in coverage, the taxable portion would be based on $50,000 ($100,000 minus the $50,000 exclusion). The employer is responsible for performing this calculation.

Impact on Your Take-Home Pay and Tax Forms

The inclusion of G.T.L. imputed income has implications for an employee’s take-home pay and tax reporting. Because this non-cash benefit increases an employee’s total taxable wages, it results in higher withholdings for federal income tax, Social Security, and Medicare taxes. This can lead to a reduction in net take-home pay.

Employers report the G.T.L. imputed income amount on an employee’s annual Form W-2. This amount is included in Box 1 for “Wages, tips, other compensation,” Box 3 for “Social Security wages,” and Box 5 for “Medicare wages.” The taxable group-term life insurance coverage over $50,000 is also reported in Box 12 of the W-2, identified with code “C.” This reporting ensures compliance with IRS regulations.