section 105 plan

[Bjorn]

Fact Pattern:

Huband with nice schedule C income. Wife helps here and there. No official w2.
They want the 105 plan to make health insurance and medical reimbursement a schedule C deduction.

I heard at an NATP class where is was allowable but when I called NATP research they said no w2 no 105 plan.

What gives? Is the w2 and all that goes with it such as workers comp minimum premium, 941s necessary to get the bang for the buck on the AgriBiz 105 Plan.


Mahalo

Bjorn

[Unregistered]

105

http://www.taxresourcegroup.com/library/memo/1249.html

[Bird Legs]

Sect. 105

Yes, the wife must receive a salary and get a W-2. Also the wife will have to be
the primary on the policy with husband on as spouse.

[Unregistered]

Ea

Contact www.base105.com on the Internet. They administer self employed spouse 105 plans. My wife is on my payroll (has been for years), receives a medical plan for her and her family and also a 401K plan. I have several clients on these plans.

Spouse must be a bona fide employee with an employee agreement contract, reasonalbe pay for work done, and a record of time worked. The devil is in the details. IRS okays these plans for spouse employees but you have to jump through the loops the same as office in home rules.

R Power

[JG EA]

Some things to think about:

Would the cost of a plan manager make the extra savings worthwhile? Figure how much you'd be able to write off on the Sch C times the extra Self-Employment tax saved over the deduction you'd be able to have anyway as an adjustment to income or Sch A adjustments.

Would a payroll service be called in to do a monthly payroll, quarterly returns, W-2's and so on? Add these costs in to see if you are actually saving money.

For accountants to do this fine. But for your average Sch C SP would they be able to handle the paperwork? Would they start having penalties/interest for some step they forgot? Would they then have to pay extra to have it all straightened out.

Community Property states need to consider if the husband/wife of the SP is really a co-owner rather than an employee.

It can be managed by a company and still save the taxpayer money, but if all that is going to be utilized is SE Health Insurance then extra costs might wipe out any savings.

Just a thought.