Scorp & Medishare

[spanel]

Scorp pays for Medishare for the two employees of the corp (only employees) (both shareholders of the corp 50/50), is this deductible on the scorp return?

Thanks!

Chris

[TaxGuyBill]

Yes, but as wages.

It sounds like a reimbursement plan for health insurance premiums to 2% shareholders. So it is added to box 1 of the W-2, and is deductible as Wages for the corporation.

[kpangelinan]

Grey area

I think this issue is going to be something that may be challenged by the IRS down the road......the iffy part is that these programs get away with many state and federal insurance regulations because they technically are not an insurance company. The reason for the "grey" area for me is that it is still in theory acting as a "type" of insurance and a taxable fringe benefit to the +2% shareholder through the corporation. I'm deducting it.

[DaveinTexas]

Why not Boxes 3 and 5?

Yes, but as wages.

It sounds like a reimbursement plan for health insurance premiums to 2% shareholders. So it is added to box 1 of the W-2, and is deductible as Wages for the corporation.

Wouldn't this be fully taxable to the shareholders in box 1, 3, and 5? As KP states Medishare is not "technically and insurance company" BUT the plan does satisfy the ACA rules to avoid the individual mandate/penalty.

I think it would be taxable in Box 3 and 5 as well under the same theory that a self employed person can't deduct the Medishare premiums on his/her return; just my opinion. I don't like it, but I think that is the proper treatment.

From a Journal of Accountancy article, "The monthly share payment is not deductible for federal income tax purposes as either a medical expense (because it is not a payment for insurance under Sec. 213(d)(1)(D)) or as a charitable deduction (because it is a payment in consideration for goods or services)."

[TaxGuyBill]

Ah yes. I misunderstood what "Medishare" was. I though it was referring to the premium for Share-of-Cost-Medicaid, rather than a Health Sharing Ministry.

So no, it is not really deductible on the corporate return unless it is classified as regular wages. It is the corporation paying for a shareholder's personal expenses, so it is either wages or a distribution.

[jsamans]

Yep, treat a CHM share as regular income if paid by an S-Corp.

Wouldn't this be fully taxable to the shareholders in box 1, 3, and 5? As KP states Medishare is not "technically and insurance company" BUT the plan does satisfy the ACA rules to avoid the individual mandate/penalty.

I think it would be taxable in Box 3 and 5 as well under the same theory that a self employed person can't deduct the Medishare premiums on his/her return; just my opinion. I don't like it, but I think that is the proper treatment.

I agree. Medi-share and other CHMs are not insurance by their own explicit statement, and the contribution isn't a charitable deduction even if the ministry is a 501(c)(3) because the ministry only facilitates the allocation of voluntary gifts made to the members and isn't itself the recipient.

Medi-share's own FAQ addresses this point: https://mychristiancare.org/medi-sha...hare/faqs/#tax

[Snaggletooth]

IRS is holding their nose on this one

Medishare is "effectively" an insurance program. In fact it does a better job of spreading the risk than conventional insurance companies. A few of my clients have it and love it - is cheaper premiums and better coverage.

I'm told it does not qualify to be a valid selection for Obamacare, but avoids the penalty by having a religious organization as its source.

Government is not going to like this one bit. They don't accept what they can't control.

[DaveinTexas]

Hold that thought

We might have all new legislation and rules to follow if the Russians would stop hacking our elections and allow for due process!!! So hilarious.

But, my point is, the rules could drastically change on the penalty, Obamacare, and the whole works, so we may not have these issues at all for 2017. Should be an interesting year for sure.

[Snaggletooth]

Not So Fast

Cheers rose from those of us on election night who oppose Obamacare, and repeal of this heinous legislation seemed evident.

But not so fast. Wholesale repeal means 20 million people will lose their insurance. Republicans are now espousing the feature which nullifies pre-existing conditions.

As far as we are concerned? There is quite substantial revenue restricted to higher-income taxpayers with the extra NIIT tax and the extra "Medicare" tax. These two taxes came with Obamacare. And it is important to note that the money raised by these two taxes have nothing to do with funding the ACA - they go into the general fund. Even the so-called extra "Medicare" tax is not going to Medicare.

And the repeal will have to make its way through Congress, members of which will be accountable for removing insurance from 20 million people, bringing back pre-existing conditions, and who will ABSOLUTELY not want to do without the Revenue for the two above-mentioned taxes.

It's a bit too early for applause...for tax planning with my customers I am projecting zero change, at least for the time being. The political implications of repeal are disastrous for those who are going to have to vote for it.

"Replace" Obamacare? Another popular phrase which tends to restore the benefits mentioned above, but the reality is for those who want to "replace" - it will be simpler to just tack on changes rather than repeal and then change later in two separate actions.

This is NOT a partisan political post - just getting down to what reality is for both parties.

[WhiteOleander]

I do not have insurance available through my employer. So, I was forced into O/care. Now, my only option for insurance is through a HMO. No PPOs offered through O/care at all. Last year my premium was 381.00 per month. This year it has gone up to 818.00 per month. And that is with a higher deductible and out of pocket cost.

Something is really going to have to be done. These increases cannot be sustained.

[jsamans]

Not quite.

I do not have insurance available through my employer. So, I was forced into O/care. Now, my only option for insurance is through a HMO. No PPOs offered through O/care at all. Last year my premium was 381.00 per month. This year it has gone up to 818.00 per month. And that is with a higher deductible and out of pocket cost.

Something is really going to have to be done. These increases cannot be sustained.

When you say "no PPOs offered through O/care," what you really mean is that your state has no insurers on its exchange that offer PPO coverage. A big part of the public disconnect about "Obamacare" is that it's not a single market for the country, and the policies offered aren't even necessarily broadly applicable within large states. Many of the complaints raised by people in one area are completely baseless in other areas; for instance, the Delaware exchange offers a wide range of plans from Highmark BCBS and Aetna, including PPO, EPO, HMO, and HDHCP options. I hear this is not at all the case in Maryland.

Letting people buy insurance across state lines, a.k.a. using Federal power to crush state sovereignty over insurance, won't solve many problems, but at least we might all end up looking at something close to the same options and could have a broader national referendum on what to do next.

The basic cost driver of healthcare is profit. Shareholders demand more profit year after year, executives want huge bonuses, and all of that comes from you when you need heart surgery or a MRI. There's no way around it.