Just curious if anyone has run across a scenario like this. The credit cannot be taken for a family member working for a more-than-2% shareholder in an S-corp. However, when I read the fine print it says that this applies to family members living in the home. In my case, the client owns an S-corp in which his adult daughter and one non-relative work full-time. The corp pays the full health insurance premium on both employees. So I'm thinking he can take the credit for the premium paid on the daughter's insurance because she lives in her own home and supports herself. Anyone have an opinion on this?
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"The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith -
Family Members
What fine print are you reading?
The instructions say:
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Excluded employees. The following individuals are not considered employees when you figure this credit. Hours and wages of these employees and premiums paid for them are not counted when you figure your credit.
The owner of a sole proprietorship.
A partner in a partnership.
A shareholder who owns (after applying the section 318 constructive ownership rules) more than 2% of an S corporation.
A shareholder who owns (after applying the section 318 constructive ownership rules) more than 5% of the outstanding stock or stock possessing more than 5% of the total combined voting power of all stock of a corporation that is not an S corporation.
A person who owns more than 5% of the capital or profits interest in any other business that is not a corporation.
Family members or a member of the household who is not a family member but qualifies as a dependent on the individual income tax return of a person listed above. Family members include a child (or descendant of a child), a sibling or step sibling, a parent (or ancestor of a parent), a step-parent, a niece or nephew, an aunt or uncle, or a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. A spouse is also considered a family member for this purpose.
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Family members are excluded regardless of whether they live in the home. This text says that you must also exclude someone who is not a family member if they are a dependent of one of the principals.
I don't see any other way to read this paragraph.
BMKBurton M. Koss
koss@usakoss.net
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The map is not the territory...
and the instruction book is not the process. -
So what are you saying there Burton?
That I need to read more carefully under deadline pressure?
If so, then you're exactly right.
Thanks for getting me back on track before I embarrass myself with the client.."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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