In very simple terms, a 105 plan is a medical reimbursement plan for sole proprietor Sch C's where the owner puts his spouse on the payroll and thus, deducts his medical cost and insurance premiums as a Sch C business expense (deduction against SE tax). This just was release from IRS "Due to new requirements resulting from the Patient Protection and Affordabile Care Act (PPACA), Section 105 HRA Plan sponsors are now required to file IRS Tax Form 720 and pay a small fee. This will impact Plan years ending 2012-2019". I do know that for those of your clients who use TASC to administer thier 105 plan, they will handle these filing for you.
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Form 720 - Penalty?
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. -
First it was the tanning salons
Now it's the HRA administrators!! Next the IRS will want to tax you if you don't have a Health Care policy......er......wait a minute what is this Obamacare stuff???
All joking aside, I do recommend TASC's Bizplan for clients who qualify so thank you for the heads up.Circular 230 Disclosure:
Don't even think about using the information in this message!Comment
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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.Comment
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Why?
Is it really necessary for a sole proprietor to use an administrator for a medical reimbursement plan for their spouse? If they have a written plan and follow it, why is the administrator necessary?
Linda, EAComment
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Wrong Forum
Linda, you're asking the wrong people here on the forum. People need to be asking the congressmen who voted for it why these
bizarre things are happening.
A link to the entire voting record, listing "yes" and "no" votes and indicating the state is as follows. This occurred in 2009,
and your congressman may or may not still be holding office:
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This is not the same world our parents grew up in (it's more complicated) . I think it's a good idea to use an adminstrator for a 105 plan, thought it not absolutely requred or necessary. I also use an adminstrator for my Money Purchase Pension Plan (I am a Sch C sole proprietor). I could do the 5500 myself if I wanted to, but it's nice to have someone in your camp if IRS challanges the plan or a filing slipped through the cracks. Also for 105 plans, proper recordkeeping is essential or the plan is invalid. The administrator (TASC) calls from time to time checking up on how I am doing with my recordkeeping.Comment
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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, EAComment
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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.Originally posted by oceanlovin'ea View Post
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.Comment
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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).Comment
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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,
SandyComment
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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.Originally posted by Nashville View PostComment
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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 ยง125. That way no one who deducts health insurance premiums gets away without having to do a special disclosure form.Comment
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My reading says
The form 720 must be completed by the plan sponsor. So your administrator can't prepare the return.Originally posted by John of PA View PostComment
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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.Comment
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