Discussion:Sch c -wife employees for health insurance
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Discussion Forum Index --> Tax Questions --> Sch c -wife employees for health insurance
| 12 January 2007 | |
| Taxpayer hires wife full time and pays her 200 per week. Health insurance cover entire family of 4. Cost of insurance far exceeds salary. Are there statutory limits on the relationship of salary to health insurance cost. | |
| January 12, 2007 | |
| No. This is a sec. 105 plan, and you probably want to formalize it to be safe. Check out www.105concepts.com or one of the others. I've used them quite happily. | |
Death&Taxes (talk|edits) said: | 12 January 2007 |
| Or if you have any corporate minute books floating about, most have a pro-forma 105 plan in them. | |
| 12 January 2007 | |
| This strategy will work inside a Schedule C proprietorship or a C corp but will fail in an S corp. I assume this is in a proprietorship. Total compensation including wages and benefits paid to wife must still be reasonable, i.e., wife must actually be performing services. | |
| January 12, 2007 | |
| New learning for me recently, you actually can do this in an S, but it's not deductible on the face of the return...merely floats the expenses back to the 1040. But this is the technique we're using to ensure that the health insurance is fully deductible on the 1040. | |
| 12 January 2007 | |
| Yeah, I guess I was thinking not of health insurance but medical expenses paid under a reimbursement plan. | |
| January 12, 2007 | |
| Note that setting it up early in the year is mandatory for Sch. C's and C corps since the medical expense reimbursement cannot be retroactive to beginning of year. Insurance premiums can be, however. | |
| 13 November 2008 | |
| Revisiting this thread:
With regard to Wobols question: "Are there statutory limits on the relationship of salary to health insurance cost". and JR1's answer "No", Can you pay employee (wife) in benefits only? | |
| 13 November 2008 | |
| Is the health ins an employee benefit? If so it can be deducted on the sched c. The wife's p/r and p/r taxes would also be deducted on the sched c.
If the wife contributes to the health ins, it would have to be noted on the W-2, so it can be deducted on sched a. If the health ins is part of a 125 plan, the deductible amt is not a tax deduction. | |
| 16 November 2008 | |
| Shoebox, there are no statutory limits in the tax law. In fact, many minimum wage jobs have health benefits that exceed the actual wages paid. However, you may be in violation of state labor laws if you do not pay each of your employees the amount required under the labor law. | |
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