IRS Warning on Sec 105 Plans

[John of PA]

Sandy,
I don't have a link. I read it in PPC's (Thomson Reuters) Tax Action Memo # 1617 dated 7-16-13, which I subscribe to.

[S T]

Sandy,
There is a 63 dollar fee for 105 plans, but unlike the 720 filing, the 63 dollar fee does not take effect until 2014. Have a good day.

Thanks John,

Do you have a link to where you found this information?

Sandy

[John of PA]

Sandy,
There is a 63 dollar fee for 105 plans, but unlike the 720 filing, the 63 dollar fee does not take effect until 2014. Have a good day.

[John of PA]

I'll let you know when I find out the scoop on it, perhaps I had bad information there.

[S T]

Thanks John on the For 720 and the $1 fee per participant,

I stll have not found any info on the $63 fee you refer to???

Sandy

[John of PA]

105 Plan Fee

Sandy,
Yes I did. The fee is one dollar for every plan participant. In my case there is only 1 participant, me wife, so I enter 1 on form 720 Part II, line 133, col a and the tax column should have one dollar in it. Sign and send it in with one dollar and don't forget the 720-V voucher form. I'm still working on how or when or where to pay the 63 dollars.

[S T]

What I see here is the Govt. taking on the mindset of banks and getting fee revenues wherever they can. (like service charges) Hit all 105 plans with a 63 dollar fee as another revenue source, like hitting all tax preparers with such a fee. I picked up the 63 fee from another very reputalble message board but have not seen the actual law yet. TASC has a call into me about my 105 plan that I did not return yet, it's probably about his topic, I'll let you know what they say about the 720 and who is doing it.

John - did you find any more information on the $63 fee and the reporting on the Form 720?

Thanks

Sandy

[John of PA]

What I see here is the Govt. taking on the mindset of banks and getting fee revenues wherever they can. (like service charges) Hit all 105 plans with a 63 dollar fee as another revenue source, like hitting all tax preparers with such a fee. I picked up the 63 fee from another very reputalble message board but have not seen the actual law yet. TASC has a call into me about my 105 plan that I did not return yet, it's probably about his topic, I'll let you know what they say about the 720 and who is doing it.

[veritas]

My reading says

Not sure about late filing penalties for the 720 but will let you know what I find out. I use TASC for my 105 plan so they will make sure nothing slip through the cracks.

The form 720 must be completed by the plan sponsor. So your administrator can't prepare the return.

[Nashville]

John of PA Didn't Say that

Good catch Joan - John of PA actually said nothing about the SEHI adjustment, on the contrary, all that he talked about was a Schedule C deduction. Soooo... I stand corrected. Please ignore previous post. And there is another post for Form 720 relating to SEHI for Medicare premiums - I think we have to let the air outa that balloon as well.

Actually, the Schedule C deduction is stronger than the SEHI because it reduces SE tax.

Maybe the effect of all this is to institute Form 720 for Schedule C filers to match the 5500 for Corporate filers who deduct under §125. That way no one who deducts health insurance premiums gets away without having to do a special disclosure form.

[joanmcq]

Do you know whether there is a Draconian penalty associated with late filing (or no filing) of this Form 720?

It sounds like a disclosure form similar to the 5500 series, which carries HUGE penalties.

It is my guess that most preparers will not know about the Form 720 and will continue to deduct SEHI in the adjustment section. OR, it might be that in our software, the SEHI will be DRIVEN by the 720 and thus be required in this fashion. If this happens, however, the IRS might have to be a little more specific about what does and does not qualify. They've been flapping in the wind on what qualifies.

Where do you see that the SEHI deduction will require the 720? A 105 plan keeps the insurance on the Sch. C rather than as an SEHI deduction.

[S T]

John of PA,
I have been watching this thread and doing some investigating. Can you provide the link for the $63 fee? I have not seen that reference yet.

Thanks,

Sandy

[John of PA]

Linda,
It sounds like your have been doing fine without an admistrator. Just be aware of this new requrement to file the 720 and pay the 63 dollar fee (unrlated to the 63 fee tax preparers pay IRS to register).

[Gary2]

I have a medical reimbursement plan for my husband who is my employee. I reimburse him for out of pocket expenses, such as insurance, prescriptions, massage therapist and dental. Once a month I write him a check for the receipts he has given me. I write him a check and it is deposited in a bank account that is in his name only. Then it is transferred out. I think that is the requirements of the plan. If there is other things that are necessary to do, I will start doing them. I just hate to pay several hundred dollars to a company to tell me I am doing it right.

With the wide availability of software, I'm sure there are many business owners who prefer to do their own taxes, rather than paying a few hundred dollars to a tax professional just to confirm what they feel they could have done on their own.

Which is not intended as either a criticism or a universal point. Rather, there can be a legitimate business reason for paying an expert to administer such plans.

[oceanlovin'ea]

I have a medical reimbursement plan for my husband who is my employee. I reimburse him for out of pocket expenses, such as insurance, prescriptions, massage therapist and dental. Once a month I write him a check for the receipts he has given me. I write him a check and it is deposited in a bank account that is in his name only. Then it is transferred out. I think that is the requirements of the plan. If there is other things that are necessary to do, I will start doing them. I just hate to pay several hundred dollars to a company to tell me I am doing it right.

Linda, EA