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    Fringe Benefits

    Client is the owner and also an employee of a S-corp. He told me his babysitter at home is being paid by his S-corp (he is the 100% owner). I explained to him in that case, whatever paid by the S-corp for his babysitter is considered taxable fringe benefit which should be included in his W-2 from the S-corp.

    Any problem with it?

    #2
    Yup, that is the way I would handle it. Might also check to see if that is a resolution which has been approved by "board of directors," and is in the minutes. Would he/spouse qualify for child care deduction? Could it qualify under Dependent Care Benefit? (Box 10).
    Last edited by Burke; 12-20-2012, 10:56 AM.

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      #3
      A Dependent Care program, whether it's a stand-alone plan established under Code §129 or as one choice available under a Cafeteria plan established under Code §125, is a possibility here ... but probably a remote one. Unless the Plan (§125 or §129) is made available to all employees (under rules that are fairly similar to the establishment of a retirement plan), it will fail the anti-discrimination test.

      In that case it becomes a taxable fringe benefit, but then the T/P may qualify for the child care credit on his own personal return.
      Roland Slugg
      "I do what I can."

      Comment


        #4
        Originally posted by Roland Slugg View Post
        A Dependent Care program, whether it's a stand-alone plan established under Code §129 or as one choice available under a Cafeteria plan established under Code §125, is a possibility here ... but probably a remote one. Unless the Plan (§125 or §129) is made available to all employees (under rules that are fairly similar to the establishment of a retirement plan), it will fail the anti-discrimination test.

        In that case it becomes a taxable fringe benefit, but then the T/P may qualify for the child care credit on his own personal return.
        Anti-discrimination test will not be a problem because the S-corp only has two employees, him and a part-time employee who is single with no dependent.

        Can you point me to the procedure to set up the plan under Code 129?

        Comment


          #5
          He can not

          Originally posted by AccTaxMan View Post
          Anti-discrimination test will not be a problem because the S-corp only has two employees, him and a part-time employee who is single with no dependent.

          Can you point me to the procedure to set up the plan under Code 129?
          Receive more than 25% of the dependent care benefits.

          Since you indicated he would be the only participant the plan would discriminate.

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