Valid S-Corp Deduction?
Ron
able to get a few items like medical insurance at a better
price in my personal name vs the company name. Can I still
make the premium payments from the corporation and take the
deduction? If not, what options do I have? Thanks
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Gene E. Utterback
> I have a S-Corp with my wife and myself as employees. I am
> able to get a few items like medical insurance at a better
> price in my personal name vs the company name. Can I still
> make the premium payments from the corporation and take the
> deduction? If not, what options do I have? Thanks
Well I guess you could have the S corp. reimburse you under
a Section 105 plan for your medical BUT because of the S
corp. rules it would be a taxable fringe benefit to you.
This is one of the traps with pass through entities.
And even if the S corp. paid the premium directly though a
group plan they set up it is still taxable to you because
you own more than 2% of the corporation - AND your wife,
simply because she is married to you, is deemed to be an
owner indirectly.
Gene E. Utterback, EA
William P. Brown
> I have a S-Corp with my wife and myself as employees. I am
> able to get a few items like medical insurance at a better
> price in my personal name vs the company name. Can I still
> make the premium payments from the corporation and take the
> deduction? If not, what options do I have? Thanks
Employees of S corporations who own, directly or indirectly,
more than 2% of the stock are treated like partners for
purposes of fringe benefits. That means if the S-Corp pays
your medical costs (I'm assuming that only close family
members own any of the stock) it is treated as a
distribution to you, not a deduction by the corporation. You
can then deduct those medical costs on your Schedule A.
Regards,
Bill
~~~~
Associate Professor of Accounting
School of Business & Economics
Longwood College
http://web.lwc.edu/staff/wpbrown/
Opinions expressed by me are mine alone, not my employer's.
DORFMONT
insurance for its employees, ALL Of THEM. you may restrict
the coverage to those who have been with you for a while,
work more than X hours per week or are over X years old. You
may find that with this plan you will have to buy a separate
policy for yourself and your wife but one of you should
cover any other family members. S-Corps are limited in what
employee benefits they can provide. If you are making enough
money to pay a salary for your wife and yourself, you may
want to revoke you S election. Contact AgriPlanBizPlan for
the legal paperwork for small business medical and life
insurance coverage. They maintain the legalese in the plan
current with any IRS regs.
http://www.plan105.com/agriplan.html
Linda Dorfmont EA
Richard B. Gardner
> I have a S-Corp with my wife and myself as employees. I am
> able to get a few items like medical insurance at a better
> price in my personal name vs the company name. Can I still
> make the premium payments from the corporation and take the
> deduction? If not, what options do I have? Thanks
Health insurance premiums for >2% shareholder-employees need
to be recharacterized as wages. It will be a deduction for
the corp as wages, but income to the shareholder. This
"wage", however, is not subject to employment tax.
---
Richard B. Gardner, EA
Thomas E. Healy
> able to get a few items like medical insurance at a better
> price in my personal name vs the company name. Can I still
> make the premium payments from the corporation and take the
> deduction? If not, what options do I have?
The S corporation can set up a medical insurance
reimbursement plan in which it pays the premiums for your
individual policies. As with insurance obtained directly by
the corporation, it will be treated as wages subject to
income tax withholding but exempt from FICA and unemployment
tax. You can then deduct 60% of the premium as self-employed
health insurance asw a Form 1040 adjustment with the balance
on Schedule A along with other medical expenses.
Tom
--Solving your tax and business problems with
Professional Service...Personal Attention
Email: THea...@aol.com
Web: http://members.aol.com/thealycpa/Index.html
Ron
>> able to get a few items like medical insurance at a better
>> price in my personal name vs the company name. Can I still
>> make the premium payments from the corporation and take the
>> deduction? If not, what options do I have?
> The S corporation can set up a medical insurance
> reimbursement plan in which it pays the premiums for your
> individual policies. As with insurance obtained directly by
> the corporation, it will be treated as wages subject to
> income tax withholding but exempt from FICA and unemployment
> tax. You can then deduct 60% of the premium as self-employed
> health insurance asw a Form 1040 adjustment with the balance
> on Schedule A along with other medical expenses.
How does the medical reimbursement plan referenced in the
last email differ from the IRC 105 type plan? From what I'm
reading, under the 105 I could deduct 100% of the premium,
out-of-pocket expenses, and more.
If this is correct, why wouldn't I do that vs take just the
60%?????
What is the downside to the 105??
Thanks