By topic: Section 105 medical plan
Inside this article, you’ll find the 14 tax reduction strategies for the self-employed that we identified for you last month. But here you find more—links to the articles so that you have the nuts and bolts of implementing the strategies.
Are you eligible for COVID-19 tax credits for yourself and/or your employees? Have you reimbursed your employees (including your employee spouse) as stipulated in your health reimbursement arrangements? And if you operate as an S corporation, do you have your health insurance set up correctly for your best tax deduction? In this article, we help with these matters and more.
Business owners who have established 105-HRAs, Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), and Individual Coverage Health Reimbursement Accounts (ICHRAs) to reimburse their employees for medical expenses need to pay an annual fee to help support the Patient-Centered Outcomes Research Institute (PCORI).
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action. This article gives you six action steps for 2019 that can help you reduce your taxes and pocket extra money.
The ACA destroyed a lot of the advantages of the Section 105 medical reimbursement plan. While the QSEHRA was, and remains, a good option for small employers, something even better has arrived—for employers of all sizes—starting in 2020.
Assisted living and nursing home expenses can quickly deplete your income and savings. One way to minimize their financial hit is being able to deduct them as medical expenses on your tax return. We’ll explain when you can do this.
Inside this 22-page medical deduction guide, you will find business and personal tax deductions that you would likely overlook. For example, is your dog or cat a tax-deductible emotional support animal? How would you deduct special needs education as a business expense? Can a health savings account turbocharge your retirement plan?
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.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action. This article gives you six action steps for 2018 that can help you reduce your taxes and pocket extra money.
Are you confused by the tax deductions you can claim for your small-business health care? We can help you with our bird’s-eye view. It takes less than two minutes.
If you are married, operate as a sole proprietor or as a single-member LLC taxed on Schedule C of your Form 1040, and have no employees, you absolutely, positively must consider hiring your spouse and creating the 105-HRA medical reimbursement plan. In this situation, the 105-HRA can cut your taxes without you spending one penny.
More than 2 percent shareholder-employees of S corporations don’t catch a lot of breaks when it comes to the taxation of fringe benefits. But arming yourself with the correct information will help you maximize your deductions and avoid costly penalties.
If you are looking for some last-minute tips to save on your 2017 federal income taxes, this article has what you need.
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, 2017, and 2018 are new years, so what is that status now?
The 105-HRA is the medical reimbursement plan you likely want to use if (a) you report your business income and expenses on Schedule C of your Form 1040 and (b) you can make your spouse your one and only eligible employee. Also, if you are single and operate your business as a C corporation, and if you are the one and only eligible employee of your C corporation, the 105-HRA is the medical reimbursement plan for you.
Sending a child to a special needs school can be an onerous financial burden, with some tuitions reaching even $100,000 per year. Tax law lets you deduct tuition and other related costs as medical expenses, but you need to know which expenses qualify and how you should deduct them. This article shows you not only how to qualify but also a possible best way to maximize those deductions.
Finally, the health insurance rules that apply to small businesses that want to provide medical benefits to their employees make more sense and allow some benefits. As you would expect, the new rules are not perfect. After all, this is tax law. But the new rules are light-years ahead of the old rules.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action to cut your 2016 taxes. This article gives you six action steps for 2016 that can help you reduce your taxes and pocket extra money.
If you struggle with depression, anxiety, or other mental disabilities, you may rely on an animal for critical emotional support. But this support animal might do even more for you. It could qualify as an animal for which you can deduct its cost, training, and maintenance.
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.
Schedule C business owners and their spouses must obtain health insurance coverage for themselves (and any other dependents) or risk a penalty under health care reform. While there are many ways to get that coverage, one way—a properly established proprietorship reimbursement arrangement—can lead to three and possibly four significant tax advantages for the business owner and spouse.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action to cut your 2015 taxes. This article gives you six action steps for 2015 that can help you reduce your taxes and pocket extra money.
The self-employed health insurance deduction could give you a big surprise when you file your taxes—and that’s not good. The law imposes a couple of restrictions that many people don’t know about and that might strip you of your tax savings. Take some time right now to figure out whether you qualify for the deduction and if not, what you can do about it.
Have you been longing for the good old days when you could offer a Section 105 health plan to your employees without having to comply with the new Obamacare rules? Well, you can still offer such a plan—provided that you limit the benefits to vision and dental.
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.
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.
A November 2014 FAQ from the Department of Labor created quite a scare for S corporation owners, raising the possibility of huge Affordable Care Act (ACA) penalties simply for deducting your health insurance premiums according to IRS guidelines. However, a recent IRS notice explains how you can now safely avoid these penalties and claim your rightful deductions.
How to Deduct Your Swimming Pool and Other Home Improvements as Medical Expenses—All Legal If You Do It Right
If your doctor recommends that you buy equipment for your health, pay attention. First of all, you should follow your doctor’s orders. But just as important, you may be able to deduct some or all of the cost. This article explains how the one-owner businessperson is in the best possible position to deduct the cost of medical equipment.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action. This article gives you seven action steps that help you reduce your taxes, pocket extra money, and get ready for 2015.
The Affordable Care Act allows you to pay for employee insurance by increasing taxable compensation. But that’s not the route you want to take, since it means more taxes for both you and your employees. This article gives you ideas on how to pay for employee insurance without hiking up your tax bill.
If you operate your business as a proprietorship and hire your spouse as an employee, you likely have questions about the need to pay wages to make your spouse a bona fide employee. And you likely want your spouse as a bona fide employee who receives as a tax-free fringe benefit a Section 105 medical reimbursement plan—family coverage, of course.
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.
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.
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.
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.
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.
The new 2014 Obamacare tax rules that apply to health reimbursement accounts (HRAs) such as Section 105 medical reimbursement plans make it difficult and impractical to have a Section 105 plan or other HRA when you have two or more employees. But if you have no employees or only your spouse as an employee, you escape the jaws of Obamacare and your Section 105 or other HRA plan gives you all the good tax benefits that you had before Obamacare.
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.
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.
In this article, you’ll learn how to create and/or ensure medical and retirement deductions before December 31. Of course, you need to get busy now. There’s not much time left. And if you are one of the targets who’s now subject to the new, higher tax rates that apply in 2013, you will find year-end planning more beneficial than ever.
The IRS just ruled that a same-sex married couple are spouses for federal income tax purposes. This means the same tax deductions and tax benefits that accrue to other married couples now accrue to same-sex married couples. The IRS ruling is a direct result of the Supreme Court’s decision in Windsor. This article sets forth business and personal tax breaks that marriage provides.
Let’s say that you have the Section 105 medical reimbursement plan in place that benefits you and your family. What happens if you or your employee-spouse retires? Here’s good news. With planning, your Section 105 plan can continue into retirement.
This article answers Section 105 medical reimbursement plan questions from two 1099 independent contractors, a husband and wife, who work for the same firm but file separate Schedule Cs. The good news is that they can substantially increase their medical deductions by using a Section 105 medical plan where one spouse becomes the employer-spouse and the other becomes the employee-spouse.
In this article, you’ll learn four tax-planning strategies for your medical deductions and two strategies for your retirement. If you want to implement the strategies for 2012, you need to get busy now. There’s not much time left, and one of these strategies requires action before December 1.
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.
If you and your spouse work together in your business, you need to know the rules of the road for owning and operating your proprietorship, limited liability company, or corporation. In part 1 of this article we discussed how you can save both self-employment and income taxes with the right mix of income and employee status of your spouse. In this part 2, you learn what you need to do to ensure that your operating business entity allows you to achieve the benefits of part 1.
CPA subscriber points out that for the Section 105 medical reimbursement plan to work, marriage is not required.
Your husband-and-wife business may already be a success. That’s great. Now, with a little tax planning for the husband-and-wife business, you can increase your after-tax profits and sleep better at night knowing that your business form is good.
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.
To know if the S corporation is the best choice of entity for your business, first you need to consider three advantages and nine disadvantages. Next, you need to take the S corporation advantages and disadvantages that apply to you and get a bottom-line number comparison with your second choice for an operating entity. In this way, you can make a logical choice, knowing that your best choice will stay with you for a number of years and let you pocket more after-tax cash while you sleep better at night.
When you and/or your spouse own more than one business, you must look at all businesses as one business when applying the Section 105 medical reimbursement plan discrimination rules. If you are blocked by the discrimination rules, consider discriminating in health insurance coverage to your benefit.
The appeals court remanded the Shellito case back to the Tax Court along with its road map for establishing the Section 105 plan. In the right circumstances, the 105 medical plan creates tax deductions where none existed before, and its tax-free fringe benefits can operate as the sole remuneration to the employee-spouse.
With proper planning, you can use two exceptions to add a Section 105 plan, FSA, or HRA to your HSA.
If you are married, operate your business as a proprietorship, and have only your spouse as an employee, you likely want a Section 105 medical reimbursement plan that can turn most, if not all, of your medical expenses into business deductions on your Schedule C. Before health care reform, you did not need to give your employee-spouse a W-2 for Section 105 medical plan reimbursements. Now, thanks to the IRS, the Section 105 medical reimbursement W-2 requirement for small businesses does not apply before the 2014 W-2 reporting season—and may not apply afterward.
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.
The new under-age-27 health insurance coverage grants windfalls, pitfalls, and planning opportunities.
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.
New guidance from the IRS on the new health care law says the owner of a business (proprietorship, corporation, LLC, etc.) may not claim the 35 percent tax credit on the health insurance premiums paid to cover his or her spouse.
The new health care law changes the requirements for deducting vitamins in your Section 105 medical reimbursement plan.
This issue contains 21 last-minute tax tips that you can use for 2010. We broke the tips into two articles: one for vehicles and one not related to vehicles. This article contains 12 last-minute tax tips that are not related to vehicles.
The IRS just clarified the Section 105 medical reimbursement plan rules for deducting over-the-counter drugs in 2011. Read this article to get updated. Then, download a sample Section 105 medical reimbursement plan document that your business can use to comply with both 2010 and 2011 requirements.
The new health care law grants a nice tax credit to business owners who cover their employees. How about the owners themselves? Lawmakers did them no favors, but one group of proprietors might catch a break.
For business owners who have children ages 22, 23, 24, 25, and 26, the new health care bill contains a healthy break, and perhaps even better than that. Amend Section 105 plans now for this new provision. Download your sample plan from this article.
The S corporation owner is an employee of his or her corporation. Thus, his or her personal payment of health insurance does not qualify for deduction on page 1 of the Form 1040. To get this page 1 deduction, the IRS says that the health insurance must be paid by the corporation and come to the owner on a W-2.
Use this Section 105 medical reimbursement plan template to make sure you provide maximum medical benefits to you and your family while legally discriminating under both tax law and ERISA rules.
As the end of the year arrives, you still have time to pocket some tax money. The 20 strategies in this article have a wide range, from getting married to selling your old vehicle. Spend a few minutes and pick up some last minute tips.
When a couple owns an LLC, they can obtain the benefits of a section 105 medical plan by filing as a single member LLC.
Which is better: paying medical insurance out of your pocket, or forming a C corporation to deduct the insurance costs? The extra tax on the corporation might outweigh the insurance deduction. Or, it might not.
Under tax law, Medicare B can be deducted as health insurance. We have proof. Also, we show you how to get the Medicare premium to qualify as an employer plan, and how to relate it to the earned income of your business.
Section 105 uses a definition of medical that is broader than that for an itemized deduction. This broadening allows you to deduct supplements and over the counter drugs to treat injuries and illness.
The Section 105 Medical Plan is filled with important details that you can’t afford to miss. Learn from the Knowles’ problems in court to see what you can do better.
This is our grand summary of the inner workings of Section 105 medical reimbursement plan. Use it wisely!
We answer one taxpayer’s question about S corporation medical benefits. We also help him decide which is better for his wife’s business: S corporation, C corporation, or single-member LLC.
You might be able to deduct Medicare payments as medical insurance premiums, but it depends which type of Medicare you have.
It is so important to know the law. We give support to a good CPA against an unreasonable IRS auditor about part-time employees’ medical benefits under Section 105.
CPAs are not always right! One couple tries to get Section 105 benefits, and is incorrectly refuted by their accountant. We give evidence to support our position, and advice on how to get Section 105 benefits.
The Section 105 medical reimbursement plan is a terrific tax-planning tool for the husband-and-wife business. But, as with any tax-reduction tactic, doing it right is critical.
In an ISP, the IRS asserted that the Section 105 medical reimbursement plan may not reimburse the employee-spouse for the cost of health insurance purchased in the employee-owner’s name. This court case held that this IRS position is wrong and that the owner may deduct the cost of medical insurance purchased in his name when that insurance is covered by the Section 105 medical reimbursement plan.
Answering “yes” to the 11 puts you on the road to audit-proof status for your Section 105 medical reimbursement plan.
Meal replacements, diet foods, and dietary supplements are substitutes for the food individuals normally consume, making them nondeductible personal expenses.
An inversion table lets someone hang upside-down by the ankles to alleviate back pain. According to tax law, it can be deducted as a medical expense.
Deducting a piece of furniture, like a back chair, is tricky. You can do it, but you have to be very precise. For example, we recommend supporting your position by getting a prescription, and building proof that this chair would not be used generally as an article of furniture
Darwin Albers employed his wife and claimed an $8,216 section 105 medical reimbursement plan deduction. He lost every penny of his claimed 105 medical reimbursements because of a few easily avoided errors.
If your spouse is working for your company, you need proof that s/he is a legitimate employee. It is not hard, but you need to have good, solid proof to ensure that your deductions and medical reimbursements will be honored by the IRS.
Learn about one couple’s problems with Section 105 medical reimbursement. You must document all payments. The reimbursement of the employee-spouse for every medical bill is easily done and a audit-proofing tactic. Make this an absolute requirement.
For employees under the Section 105 Medical Plan, the law authorizes a medical deduction for transportation to receive medical care. You may reimburse any medical expense that you could otherwise deduct on your Form 1040.
The tax law allows you to deduct the cost of laser eye surgery, as long as it produces a business benefit. There are specific details that apply, though, so read carefully.
You get no business benefit from the section 105 plan at the S corporation level. However, you do get a big personal benefit when you steer the medical insurance through the S corporation to give yourself the medical insurance as a guaranteed payment.
Vitamin use falls into two different categories depending if you reimburse them under Section 105 Medical Plan or file them in your tax returns under your 1040.
Here’s an example of a perfect plan for using the Section 105 Medical Reimbursement Plan for an employee-spouse in a single proprietorship.
It is possible to save big on medical insurance if you use the Section 105 Medical Reimbursement Plan. If you navigate the tax law correctly, you might be able to save $4,000, like one taxpayer. Knowledge is power.
If you hire your spouse, you can save a lot of money in taxes by not paying him/her a wage. Instead, cover him/her and your family with medical benefits under Section 105.
When the husband and wife work together in the business, but report that business on one Schedule C, they create a tax problem for themselves. Is this a partnership or joint venture where both husband and wife have earned income subject to self-employment taxes? You can avoid this problem by hiring the spouse not reporting on a Schedule C. You then can avoid payroll taxes on the wages to the employee-spouse by making the compensation non-W-2 income.
When designing the medical plan, you need to consider all your and your spouse’s proprietorships, LLCs, and corporations as one business. If employees exist in one of these businesses, you have employees in all businesses. Plan your discrimination or nondiscrimination accordingly.
The more than 2 percent owner of an S corporation may not benefit from a fringe benefit like corporate paid health insurance. Further, this owner-employee is not “self employed” for purposes of deducting self-employed health insurance on page 1 of IRS Form 1040. This leaves the more than 2 percent owner with only one IRS approved method for gaining the maximum deduction from health insurance.
In Chief Counsel Advice, the IRS clarified its position that a sole proprietor may deduct the cost of health insurance on his or her Form 1040 regardless of whether the insurance is purchased in the individual’s or the proprietorship’s name.
The W-2 reporting requirements exempt the Section 105 medical plan reimbursements from entries on the W-2.
This court case provides a great roadmap to the Section 105 medical reimbursement plan. The taxpayer hired her husband as a part-time employee. The husband had another job as a full-time employee where he elected a payroll deduction for a medical plan that covered himself and his family. In her proprietorship, the wife put a Section 105 medical plan in place that covered the employee-husband. He elected family coverage, and presto, the monies he paid to his full-time employer for medical coverage became a Section 105 medical reimbursement, deductible by the wife’s proprietorship.
In 1935, the self-employment tax topped out at $60. In 2006, the first part of the self-employment tax tops out at $14,413, but the 2.9 percent Medicare part continues after that without limits. Good tax planning for the self-employment tax is like an annuity. It gives you monetary returns—year after year—every year you are in business. So, plan now and consider everything from choice of entity to hiring your children.