User talk:Riki EA

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Hi

I am a CPA in California. I have a client with the same issue. However he is the only one in the Corporation and the Corporation did make a profit this year. He has been paying medical premium and expenses through his company. I was wondering what you found out.

Thanks, Jill Jrichling@padgett.com

C Corp, No Salary, Health Insurance

Hello Jill, I wasn't able to find out anything cut-and-dried from the IRS, but I did have an e-mail conversation with a Sec 105 representative. He told me that health insurance reimbursement in lieu of salary can be reasonable if the company is having cash flow or profitability issues that preclude paying a salary. It makes sense that a business owner might be willing to work for health insurance alone, since he or she is invested in the success of the company and may be able to draw a salary later on, when the corporation is profitable. To be on the safe side, the corporation should have a written plan in place for coverage of health insurance premiums of employee-shareholders, and also have an employment contract with the shareholder that states that compensation has been solely medical insurance reimbursement. If the company reimbursed the shareholder for the expenses rather than paying the insurance company directly, the shareholder should present the company with canceled checks or receipts, and a copy of the insurance policy showing coverage, to keep with the corporate records. Hope this helps!

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