Discussion:SDI insurance related question
From TaxAlmanac
Discussion Forum Index --> Accounting Questions --> SDI insurance related question
| 31 December 2007 | |
| Hello, I have a question related to SDI.
My wife is running an S-Corp with herself as employee. Basically she works as a contractor for a company and takes salary on a monthly basis. She takes about 50% of the income as salary on payroll. 20% goes as expenses and remaining is sitting in the bank for owners draw at the end. We are expecting a baby in June 2008. My questions are... 1) Is she eligible for claiming short term disability from 9th month when the expecting date nears? If so, how much would that be? (She is paying SDI to the EDD). 2) How was the SDI allowance caliculated? What would be the basis for the pay that the government pays? 3) Can she increase her pay now to say, 70%, so that we can take advantage of the SDI money? 4) Is she eligible for bonding leave? If so, for how long? (She is planning on taking 2 months off at the end of next year) Appreciate your input in this regard. Thank you. | |
| 31 December 2007 | |
| I strongly recommend that you see a tax professional as you've got a number of different tax issues commingled into the same facts.
As an S Corp - she is supposed to take a reasonable salary - not take a small salary and then "an owners draw" at end of year. In S Corp terms, that's a distribution of profits. IRS is very strict on S owners doing that to avoid the FICA and Medicare payroll taxes. Regarding the disability issue - that's something you need to take up with the insurance carrier via your insurance rep - as disability insurance is state run and each state has different rules. So as I stated, you really need to speak with a local tax professional who can sort these matters out with you. | |
Actionbsns (talk|edits) said: | 1 January 2008 |
| Happy New Year Kingno, the questions you are asking about SDI can probably be answered at the EDD website. But having spent many years in California and mucking about with the State system there, I'll attempt a simple answer. The SDI benefit is going to be based on the wages that have already been reported to EDD via your quarterly reports (DE-6). If she were to increase her wage now, then the reports will reflect that, and her SDI benefit should be higher as a result. I'm not sure if California considers pregnancy an event that will pay out for SDI, so check the website, or call your local EDD office for guidance. I don't recall anyone ever applying for and receiving benefits as a result of pregnancy, which doesn't mean it can't happen, it only means that of my client base, no one ever received benefits for this. Your other questions need to be dealt with as US suggests since you are asking questions in several different areas. | |
| January 1, 2008 | |
| Action, federal law recognizes pregnancy as a temporary "disability," so I would think that all employers would be required to provide some benefits.
Kingno, I suggest you read the insurance policy and take a look at a claim form. You will probably see a benefit payout cap in the policy. From the claim form you should be able to tell what period the insurance company will look at when determining the benefits. Benefits usually start after birth unless there is a problem with the pregnancy prior to that. In some cases there may be a waiting period. (For example, Hawaii has a one-week waiting period before a person is eligible for benefits.) What is "bonding leave"? | |
Actionbsns (talk|edits) said: | 2 January 2008 |
| Natalie, SDI is a state sponsored program, it's not like TDI in Hawaii, which is underwritten by various commercial carriers. There is no insurance carrier, the program is administrated through the EDD. This is the program Kingno is referring to when asking about SDI. Even though the Federal government recognizes pregnancy as a temporary disability, if a person doesn't live in a "cash sickness" state, my understanding is that disability benefits of any kind would be provided by the employer the same as health insurance, that is, some will and some won't. If they do provide disability insurance that includes temporary disability as well as long term, then pregnancy would need to be included as you point out. | |
| 2 January 2008 | |
| In Calif - SDI for pregnancy covers the first few weeks and is tax exempt. The next few weeks are PFL (paid family leave) and that income is taxable. I think each time frame is six weeks for a total of twelve weeks....guess I'll find out as my office manager is prego (fortunately not due until May 25th. | |
