Discussion:Group plan - sec 125 for S corp 100% owner
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| Revision as of 11:17, 24 November 2007 Natalie (Talk | contribs) (There are a coup) ← Previous diff |
Current revision JAD (Talk | contribs) |
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| Is this too good to be true? Or is this a legitimate way for a 100% owner/employee to be able to get these types of benefits?}} | Is this too good to be true? Or is this a legitimate way for a 100% owner/employee to be able to get these types of benefits?}} | ||
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| - | {{ForumReplyPost|UserID=JAD|Date=20 November 2007|Text=I operate as a C corp and looked every which way to find a way to do dependent care - without success. I am interested to see how this turns out for you. }} | ||
| {{ForumReplyPost|UserID=Riley2|Date=20 November 2007|Text= | {{ForumReplyPost|UserID=Riley2|Date=20 November 2007|Text= | ||
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| {{ForumReplyPost|UserID=Natalie|Date=November 21, 2007|Text=Thanks for the historical perspective D&T. What a mess the code is, huh?}} | {{ForumReplyPost|UserID=Natalie|Date=November 21, 2007|Text=Thanks for the historical perspective D&T. What a mess the code is, huh?}} | ||
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| - | {{ForumReplyPost|UserID=JAD|Date=21 November 2007|Text=Natalie, you can enjoy the benefits of the medical reimbursement plan if you change to C corp status.}} | ||
| {{ForumReplyPost|UserID=Death&Taxes|Date=21 November 2007|Text=I have had one since 1991, and when I had a full time employee, she participated too. Only makes sense for people like ourselves who have some idea how to keep books and know how much to pay ourselves.}} | {{ForumReplyPost|UserID=Death&Taxes|Date=21 November 2007|Text=I have had one since 1991, and when I had a full time employee, she participated too. Only makes sense for people like ourselves who have some idea how to keep books and know how much to pay ourselves.}} | ||
Current revision
Discussion Forum Index --> Basic Tax Questions --> Group plan - sec 125 for S corp 100% owner
Discussion Forum Index --> Tax Questions --> Group plan - sec 125 for S corp 100% owner
| November 19, 2007 | |
| I know a 100% owner/employee of an S-corp is not allowed to participate in a Sec. 125 plan (on its own) that provides out-of-pocket medical benefits or dependent care. A business organization that I belong to recently announced a new benefit to its members -- Sec. 125 plan. The plan is through AFLAC. I was told by a representative that I would be able to qualify in the Sec. 125 plan as long as I purchased one insurance product. I made sure to tell her that I was a 100% shareholder and employee of my corporation. She said that I did qualify and was ready to set an appointment with me.
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| 20 November 2007 | |
| Natalie, Sec. 105 and Sec. 125 plans are for employees. For fringe benefit purposes, you are considered to be a partner in a partnership. | |
| November 20, 2007 | |
| Yeah, well, the sales associate assured me that I was eligible. Of course, we were supposed to meet today, and she has not called me back. I guess that says it all. Thanks Riley. | |
| November 20, 2007 | |
| Let's just say it in plain English -- an owner/employee of an s-corporation is NEVER EVER allowed to participate in one of these plans. (The manager called me back and informed me that "unfortunately blah blah blah" just as I had suspected.)
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| 21 November 2007 | |
| IRS is following the law written by Congress. Sections 105 and 125 were specifically designed by Congress to be used by employees, not owners. | |
| November 21, 2007 | |
| Thanks Riley. So, just because I decide to work for myself, I cannot avail myself of these programs. I work. My husband works. Lots of owner/employees work. And they have children, and out-of-pocket medical costs. I guess this is another case where we should lobby to have the law changed. But wait, we're all working.
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Death&Taxes (talk|edits) said: | 21 November 2007 |
| Natalie: when I was in college many moons ago, even before JR was setting up S Corps for all, the concept of the S Corp was new. I remember the instructor telling us that Congress wanted to give the sole proprietorship the liability protection of the corporation without double taxation. So from the get-go the shareholders were thought of as quasi self-employed, or as Riley puts it, partners. Before the S was put into law, many were incorporating anyway. Back then FICA was paid on $3000 or less, and there was no child care etc etc etc. Like so many things in our code, these rules have not changed. | |
| November 21, 2007 | |
| Thanks for the historical perspective D&T. What a mess the code is, huh? | |
Death&Taxes (talk|edits) said: | 21 November 2007 |
| I have had one since 1991, and when I had a full time employee, she participated too. Only makes sense for people like ourselves who have some idea how to keep books and know how much to pay ourselves. | |
| November 22, 2007 | |
| Well, maybe I should re-evaluate the corporate status issue. One of the reasons I chose S corp, however, was so I wouldn't have to worry about draining the profits from the C. What happens when there's a profit, but no cash to pay out wages? | |
Death&Taxes (talk|edits) said: | 22 November 2007 |
That is what pensions that can be paid the following September are for  . Actually there have been times I have taken a paycheck and then had to lend the company money since January is not a big month in the tax prep business, or at least for me. I have also laid out $500+ in corporate tax but then have also had it refunded with small losses.
The C being used for a 105 [and if you would like disability, or even long term care insurance] must be carefully weighed, especially if you will have to hire full time help. I recall just before I moved from Philadelphia to upstate NY, my full time employee in PA, whose job was ending, went out and used the 105 to get glasses in her last month! btw, I have never deducted disability for the obvious reason. | |
| November 22, 2007 | |
| Ah, yes, pensions. I've played the January loan game as well. Thanks D&T. | |
| 24 November 2007 | |
| You might want to consider a HSA. It can be funded by the S-Corporation therefore making the medical payments pre-tax. | |
| November 24, 2007 | |
| There are a couple of issues with HSAs:
1. Not allowed to have a "first-dollar coverage" policy and 2. Requirement to have a high-deductible health plan. I looked into a high-deductible plan as a substitute for my regular health insurance, and the regular health insurance plan was much better for us. Thanks for the suggestion, though. | |
