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Discussion:FSA-2% shareholder

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Discussion Forum Index --> Advanced Tax Questions --> FSA-2% shareholder


Discussion Forum Index --> Tax Questions --> FSA-2% shareholder

Jeff-Ohio (talk|edits) said:

24 December 2009
I've read all the rules and regs and realize a 2% shareholder is merely inelibile to participate in a FSA plan. It's not included in income, simple can't do it. Is an HSA the sane animal? Is it all reimbursement type accounts? Cafeteria plans appear to have the same regs.

Only alternative to invest in highly deductible insurance plans, scorp pays the premium, included in wage and then deducted on the 1040.

Merry Xmas.

Umk395 (talk|edits) said:

25 December 2009
Owners and officers with greater than 2% share of a Subchapter S corporation cannot make pre-tax contributions to their HSAs through the company by salary reduction. In addition, any contributions made to their HSAs by the corporation are taxable as income (Box 1 W-2). However, they can make their own personal contributions to their HSAs and take the "above-the-line" deduction on their personal income taxes.

Jeff-Ohio (talk|edits) said:

25 December 2009
Yes, thanks....Morei interested in the FSA animal. FSA carries same rank? Can make after-tax contributions? Assume no benefit to that and the contributions made by the shareholder to the employees FSA are deductible by the SCorp.

Umk395 (talk|edits) said:

27 December 2009
Same rules apply for an FSA. S Corporation shareholders above the 2% level may not participate in cafeteria plans.

Self-employed individuals, partners, and shareholder employees of a Subchapter S corporation who directly or indirectly own more than two percent of the company's stock are ineligible to participate.

Jeff-Ohio (talk|edits) said:

29 December 2009
Got it....but, after-tax contributions (defeats the purpose I guess) are permissible?

What do you suggest to S-corp owners (100%) that may have 3-5 employees? HSA? Does an FSA for the aforementioned appear worthless?

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