By topic: Insurance

Section 105 Medical Expense Deduction Plan for Statutory Employee

The tax code has a carve-out that creates statutory employees out of certain independent contractors. These contractors receive a W-2 with the “statutory employee” box checked, which means that the contractor reports the W-2 income and associated business expenses (including a Section 105 plan) on his or her Schedule C.

Q&A: No FICA on Health Insurance for the More-Than-2% Shareholder-Employee

There’s no excuse for it, but how to treat the payroll taxes (Social Security, Medicare, and federal unemployment taxes (FUTA) when the S corporation pays for or reimburses health insurance for the more-than-2-percent shareholder-employee sits in muddy waters—but perhaps only until you read this article.

Beware: IRS Error in Rental Property Deduction Publication

The IRS publication on rental properties contains an error. It states that you may not deduct mortgage insurance on your rental property. That’s wrong, as we explain in this article.

Avoid This S Corporation Health Insurance Deduction Mistake

If you own more than 2 percent of an S corporation, you have to follow special rules to deduct your health insurance premiums. The health insurance rules can also apply to family members who work in the business and don’t own a single share of stock. Don’t let the zero stock be a surprise and cost your family money.

How to Reimburse Medicare When You Have Fewer Than 20 Employees

The Affordable Care Act’s $100-a-day penalty for improper medical reimbursements likely has your attention. It should. But you can find many reimbursements that are allowed without penalty, including the ability to reimburse Medicare when you have fewer than 20 employees.

Life Insurance Policy Loan: A Tax Nightmare

Do you have an inside buildup of cash value in your life insurance policy? Are you taking loans from the policy or letting the policy ride with premiums being paid from the cash value? If yes, make sure you know the tax consequences of your actions.

Q&A: Avoiding the $100 a Day per Employee Penalty for S Corporations

The answer in this article explains how the S corporation can pay the solo owner-employee’s individually purchased health insurance without worrying about the $100-a-day penalty.

Q&A: Health Insurance Premiums and Reasonable Compensation

Your S corporation has to pay you reasonable compensation for the services you provide to the corporation. If your corporation pays your health insurance premiums, does that change the salary amount you need to pay yourself? We’ll tell you the answer and how doing it wrong would cost you money.

How the TCJA Tax Reforms Hammer Personal Casualty Loss Deductions

The Tax Cuts and Jobs Act makes claiming a tax deduction for a personal casualty loss more difficult. And when you do qualify to deduct a personal casualty loss, you face a number of rules that add to your misery by making the loss deduction difficult. In select circumstances, you can use a safe harbor, which makes things a little easier.

Tax Time Bomb: Passive Foreign Investment Companies

Passive foreign investment companies, or PFICs, are subject to some of the most complex provisions of the tax law. You may own one and not even know it. In this article, we give you the basic rules so that you know what PFICs are and the different ways you can pay tax on them (yes, you have options!).

Lawbreakers Rejoice! New Law Wipes Away $100-a-Day Penalty

Do you have fewer than 50 employees? Are you in compliance with the Affordable Care Act? Whether you are in compliance or not, we may have some big news for you. First, if you failed compliance, a new law has likely just released you from the monstrous $100-a-day penalty ($36,500 per employee per year). Second, if you made changes to get into compliance, you may have overtaxed your employees. Now, with this new law, you may be able to undo some or all of that overtaxation.

Tax Tips for Tax-Free Disability Income and Deductible Premiums

Tax law grants tax-free income status to the proceeds you receive from income replacement disability insurance policies. You pay a price for this tax-free income: You may not deduct the premiums. Special treatment applies to overhead disability, and there’s also special treatment for S corporation payments on behalf of “more than 2 percent” shareholders.

Q&A: Affordable Care Act

 

Make Magic with a Section 105 Plan

Health insurance premiums are rising at an astronomic rate. This is one of the biggest monthly expenses for many families. That’s where, because you are in business, a properly planned and executed Section 105 plan can work for you. This plan works like magic—it turns your medical expenses into tax-favored business expenses.

2016 Health Insurance for S Corporation Owners

In IRS Notice 2015-17, the IRS allowed S corporation owners in 2014 and 2015 to avoid the $100-a-day penalties on S corporation reimbursements of individually purchased health insurance and on providing insurance for the owners only. But 2016 is a new year, so what is that status now?

Q&A: Help? Affordable Care Act Health Benefits for One Employee

 

Captive Insurance: Huge Tax Shelter

Do you have significant insurance needs? If so, the captive insurance company might save you money on your insurance, create a nice tax shelter, and produce a pile of cash. To achieve this agreeable result, you have to follow the rules and consider the tax code safe harbors.

Don’t Pick the Wrong Way to Deduct Long-Term Care Insurance—This Could Cost You Thousands

You can protect yourself against the financial consequences of chronic illness or disability by purchasing long-term care insurance. The premiums for this insurance are not cheap, but tax law lets you write off the cost, thus subsidizing your purchase. But beware—there are three ways to take this deduction. Choosing the wrong method could cost you thousands of dollars in tax benefits.

How to Beat the Absurd New IRS Rule on Taxable Reimbursements of Employee Health Insurance

The IRS just launched its latest attack on your reimbursements for individually purchased health insurance: Even fully taxable reimbursements could still violate the Obamacare rules and expose you to the $100-per-day penalties. But don’t worry. We’ll give you several strategies to beat this new rule.

Big News: IRS Undoes the $100-a-Day Obamacare Penalty and Overtaxation of Your Employees

Whether or not you complied with Obamacare last year, we have some big news for you. It’s no problem, compliance or not, and either way the news is big for two reasons. First, if you failed Obamacare compliance in 2014, the IRS likely just released you from the monstrous $100-a-day penalty. Second, if you did it right, you may have overtaxed your employees and now, with the new IRS guidance, you can undo that overtaxation.

Two Compelling Reasons to Set Up a Tax-Advantaged Health Insurance Plan: It Saves You Money and It Delights Your Employees

If you are a regular reader of the Tax Reduction Letter, you know that you can use a Section 125 plan to save money on group health insurance. A number of subscribers have requested a template for how to set up one of these plans, and that’s what this article is all about—we’ll help you get your plan up and running.

How to Escape Payroll Taxes on S Corporation Health Insurance

Would you like to avoid payroll taxes on your S corporation’s inclusion of the cost of your health insurance on your W-2? You can. First, you and your S corporation can take advantage of one of two safe harbors. If you don’t qualify for a safe harbor, you can go back to a law originally enacted in 1939 and claim that you are in a separate class of employee exempt from payroll taxes on the health insurance fringe benefit that your S corporation gave you. And then if all else fails, you can pull out the IRS’s own publication and its online assistance and insist that the IRS follow them, even though they’re legally incorrect.

Defined Contribution Health Plans versus the Tax Code

You may have seen advertisements online for “defined contribution health plans.” If you use one of these plans, be sure you understand how they work. Some of them appear to offer reimbursement methods that violate tax law and expose you to enormous penalties. Read this article to identify both the safe and unsafe types of defined contribution health plans and learn how to comply with the law.

When You Can (and Can’t) Deduct Mortgage Insurance

When you buy a house with less than 20 percent down, your lender will almost always force you to buy mortgage insurance. This protects the lender in case you default. Tax law used to help a lot people with the cost of mortgage insurance by allowing a deduction to certain taxpayers. That selective help on personal homes expired in 2013, but there’s hope for an extension, and existing deductions continue for your rentals and office in the home.

Small Employer Health Care under Obamacare

This article gives you a bird’s-eye view of the new health care landscape so that you can see all your post-Obamacare health care options together in one place. Choose the health plan that works best for your business based on the number of employees you have and the amount of money you are willing to spend.

Secrets of 105 Plan Multiple Employee Coverage under Obamacare

As you know, Obamacare has a dramatic impact on Section 105 medical plans that cover more than one employee. Of course, the first question is who is an employee for purposes of the Section 105 medical plan. And if you have multiple employees, you will be happy to know that this article gives you eight strategies for making the 105 plan work for you.

S Corporation Owner’s Path to Health Care under Obamacare

If you are an S corporation owner and you buy health insurance for yourself or your family, you need to follow the IRS rules described in this article in order to protect your tax deductions for the health insurance premiums. You also learn how to escape the Obamacare penalties for group health care even if you discriminate against your employees.

The Best Way to Pay for Group Health Insurance

If you want to cover your employees with group health insurance but worry that the price tag will skyrocket your budget, you need to read this article. You will learn how to limit your annual cost and provide tax breaks to employees for their share of premiums. By following some or all of the strategies, you can drop your after-tax cost of group health insurance coverage.

Big Mistake with Life Insurance Policy

Once you borrow money from your life insurance policy, you need to pay attention and ask some questions. First, are you using the loans for a business purpose? Second, are you repaying the loans? Third, if you’re not repaying the loans, what happens when the loan balance causes the insurance company to terminate your policy? If you know what happens, you’re prepared. But if you don’t know what happens, you’ll be unhappy when you receive your tax surprise.

2014 Attack by Obamacare on Section 105 Medical Plans (HRA Plans)

For tax years’ beginning after December 31, 2013, Obamacare contains good and bad news for Section 105 medical reimbursement plans—health reimbursement accounts (HRAs). Bad news: the new health law requires that you pay for group health insurance if you want a Section 105 plan for more than one employee. Good news: with one employee only, such as your employee-spouse or yourself if you operate as a C corporation, you don’t have to buy group health and you can reimburse expenses as you always have.

HSA Solution to Obamacare

Do you employ 50 or fewer employees? Are you looking to do something on the health care front, but not interested in the group health insurance option? Health savings accounts (HSAs) could be exactly what you are looking for, especially as Obamacare becomes law.

Are Overhead Disability Monies Subject to Self-Employment Taxes?

Do you have disability insurance? Is your disability protection a traditional disability income policy or a disability overhead expense policy? If you become disabled, do you have to pay self-employment taxes on the benefits that you receive? This article explains what you need to know about the disability policies and the self-employment tax.

Mom Dies: Daughter Inherits and Fixes Five Inferior Annuities

Say you inherit an annuity. That’s nice. But when you examine the annuity you find that it’s a bad investment; what can you do about it? Answer: plenty! This article shows you how a Section 1035 tax-free exchange can work to your benefit. Note the words “tax free.” That’s lovely, a tax-free fix for a bad annuity.

Clarifying Flow Chart for S Corporation Health Insurance

The flow chart in this article helps you visualize what needs to happen at the S corporation for the owner-employee to get any tax benefit from health insurance. The tax rules are not what you would call logical, but the flow chart clarifies the rules and gives you the path to follow to ensure your tax deductions.

Shellitos Win Their Section 105 Medical Reimbursement Plan Deductions

Good news. As you may remember from our previous article, the 10th Circuit Court of Appeals sent the Shellito case that involved a Section 105 medical reimbursement plan back to the tax court. We report in this article good news: The tax court reversed its original decision and granted the Shellitos their deductions. Most importantly, this reversal adds clarity to making your Section 105 medical reimbursement plan work.

Better Deductions for Long-Term Care Insurance Costs

Because you are in business, you likely have the opportunity to improve your tax deduction for long-term care insurance. In fact, you might achieve a 100 percent deduction. If you are married, the 100 percent deduction can include your spouse.

Add Tax Deductions on Top of Your HSA with a Section 105 Plan, FSA, or HRA

With proper planning, you can use two exceptions to add a Section 105 plan, FSA, or HRA to your HSA.

Life Insurance Policy Loan Tax Nightmare

The inside buildup of cash value in your life insurance policy coupled with loans against the policy can create an unexpected taxable outlay on your part.

IRS Secretly Allows Medicare Part B as Self-Employed Health Insurance Deduction

The IRS changed its 1040 instructions to allow the proprietorship and single-member LLC a self-employed health insurance deduction for Medicare Part B. The impact on the S corporation owner is not as favorable.

Nine Important Facts about the New Age 27 Health Insurance Rules

The new under-age-27 health insurance coverage grants windfalls, pitfalls, and planning opportunities.

Tax Tips for the S Corporation’s Fringe Benefit Realization

Tax law creates trouble for selected fringe benefits that the S corporation gives to a more than 2 percent shareholder. The loss of benefits and accompanying complications are factors to consider in the selection of the S corporation as your choice of business entity.

Should You Have a Health Savings Account?

As a business owner, you should have your health insurance in a tax-advantaged position. If it is not possible or practical to utilize the Section 105 medical reimbursement plan, consider the health savings account.

How Tax-Favored Health Savings Accounts Work in a Nutshell

Here is the big picture on how the health savings account (HSA) works for the proprietor, S corporation owner, and C corporation owner. The good news is threefold: (1) the tax deduction for the high-deductible insurance, (2) the tax deduction for the HSA investment account, and (3) the tax-deferral and tax-free use of the HSA investment account.

Tax Tips for the HSA: Buying High-Deductible Insurance

You need to strategize your purchase of high-deductible insurance to maximize your HSA tax-favored investment portfolio.

Seeing the HSA in Action for One Year

The health savings account (HSA) offers the opportunity to save on insurance costs and create an investment nest egg. To learn how the HSA could work for you, do some easy arithmetic, like we show you in this article.

New Law Grandfathers Discriminatory Health Insurance

Many one-owner and husband-and-wife-owned businesses opt for discriminatory health insurance plans for their businesses. The new health care law eliminates that discrimination for new plans but allows grandfathered plans to continue as before.

Tax Cut for Prepaid Expenses Pays Better Than Seen at First Glance

Prepaying expenses has been a most overlooked tax planning strategy because it is misunderstood. Proper use of the new safe-harbor prepayment rules can guarantee the prepayment deduction. Continued use of prepayments combined with strong investment returns can produce a nice addition to your net worth.

Tax Deduction Checklist Should Include Repairs

Learn when to tax deduct flood damage as a casualty loss or repair deduction and avoid capitalization. The law gives business owners an advantage when they fix up their business property after a floor or other casualty.

Turbo Tax Error Corrected

When using tax preparation software, be alert to automatic calculations that could place improper amounts on your tax returns.

New Safe Harbor for Tax-Deferred Exchanges of Annuity Contracts

Big changes have happened to financial instruments in the last few years. You can take advantage of a new tax law that allows one to exchange one annuity for another, and save in tax deferments.

Corporate Payments of Disability Policy Cause Court Case

Take it from Richard Cotler: if you operate as a corporation, make sure to keep your personal and corporate expenses separate. Asking a court of law to separate your personal and business expenses is an expensive and time-consuming task. And you absolutely should keep the personal expenses clearly identified or, better yet, not on the corporate books at all.

Tail Insurance

As a surgeon, you might get malpractice tail insurance (insurance that covers malpractice claims should you quit and go to another hospital). We suggest having the hospital pay the insurance costs, even if they deduct your pay, to protect yourself from the AMT.

Tax Breaks When You Total Your Vehicle

Tax law calls the wreckage and totaling of your vehicle both an involuntary conversion and a casualty. Special rules allow you to treat the involuntary conversion as either a sale or a trade-in. Thus, your first step in this process is to find your gain or loss and then decide how you want to claim your tax benefits.

Terminated Insurance Salesman Subject to Self-Employment Tax on Renewal Commissions

In this court case, the taxpayer was self-employed when he made the original sales. The original sales produced the renewal commissions. Thus, the taxpayer was self-employed with respect to the renewal commissions.

Home Mortgage Interest Deductions Denied

Interest paid on a life insurance loan to buy a home does not count as deductible mortgage interest.