IRS Warning on Sec 105 Plans

[John of PA]

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.

[Snaggletooth]

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:

http://keyboardmilitia.com/2010/05/18/the-obamacare-voting-record-we-wont-forget/

[oceanlovin'ea]

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, EA

[John of PA]

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.

[DaveinTexas]

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.

[Nashville]

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.

[John of PA]

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.