One Person S Corporation Health Insurance Deduction at Risk, Advises CoreDocuments.com : Insurance News Onlypunjab.com- Insurance News

One Person S Corporation Health Insurance Deduction at Risk, Advises CoreDocuments.com
Publish Date : 12/22/2006 10:02:00 AM Source : Insurance News Onlypunjab.com

Core Documents, Inc. the nation's primary source for affordable Section 125 and Section 105 HRA plans claims they have a solution to the problem IRS Headliner 163 has created for one person S corporation owners. See Core Documents at www.CoreDocuments.com
First, let's outline how S corporation owners took health insurance deductions before IRS Headliner 163. For fringe benefit purposes, the S corporation is treated as a partnership and owners are treated as partners under IRS Section 1372. And under IRS Section 162(l)(5), because the S corporation owner is treated as a partner, he is treated as self-employed and is able to deduct health insurance premiums as above-the-line deductions on the 1040 Form, for income tax deductions only. The 15.3% self-employment tax still applies.

After IRS Headliner 163 the sole shareholder/employee or owner of an S corporation who purchases health insurance in his or her name instead of the name of the S corporation will no longer be able to take an above-the-line tax deduction. To take the above-the-line deduction health insurance must be purchased in the name of S corporation (a group plan). The deduction for policies purchased in the name of the sole shareholder/ employee will now be an itemized deduction subject to the 7.5% AGI limitation. Which means most owners will lose all or most of the health insurance deduction.

In an effort to make this as simple as possible as it relates to deductibility: Group Health Insurance - Good; and Individual Health Insurance - Bad. However, Core Documents has a solution. Before I show you the solution let's clarify exactly how IRS Headliner 163 will affect the S Corporation Owner's tax return in more detail.

Two different health insurance tax consequences are created by IRS Headliner 163:

Group Insurance: The owner purchases group health insurance in the name of the S corporation; the company pays the owner's premium; the premium payments are deducted by the company as W-2 income to the owner; income is reported in Box 1 of the W-2 for income tax; and Boxes 3 or 5 of W-2 as wages for Social Security, Medicare and FUTA tax. Because the health insurance is a Group Plan (key point) it can be taken as an "above-the-line" 1040 deduction from gross income. Above-the-line simply means the deduction can be taken off the top of gross income regardless of whether the owner itemizes deductions. This method saves only income tax. The owner still pays the 15.3% self-employment tax (aka Social Security & Medicare) and FUTA tax on insurance premiums.

Individual Health Insurance: The owner purchases health insurance in his or her name; the S corporation pays the premium; the premiums are deducted by the company as W-2 income to the owner; income is reported in Box 1 for income tax, Boxes 3 or 5 of W-2 for Social Security, Medicare & FUTA taxes. Because the health insurance is in the name of the owner, (key point) the owner would have to itemize the deduction which would be subject to the 7.5% AGI limitation. The 7.5% AGI limitation only allows the Owner to deduct expenses that exceed 7.5% of his or her Adjusted Gross Income (AGI). (Example: owner has $100,000 AGI; 7.5% = $7,500; health insurance deductions will only be allowed in excess of $7,500). The owner pays income tax on most of the premium, and 15.3% self-employment tax on the entire premium. Almost no deductibility at all.

Core Documents' Solution: The S corporation owner who is also an employee should establish a Section 105 Health Reimbursement Arrangement or HRA at www.Core105.com for a one-time setup fee of $99. The Section 105 HRA is technically an ERISA health and welfare plan, (self-funded health plan with limited liability). The HRA is sponsored by and in the name of the S Corporation which meets the requirement of IRS Headliner 163 for a "group" plan. Under IRS 213(d) the Section 105 HRA plan allows deductions for individual health insurance, plus an added bonus of out-of-pocket medical, dental and vision expenses (bonus #1). IRS Headliner 41 says if payments to the Owner/employee are made under a "Plan" (such as the Section 105 HRA Plan) the amount would only be subject to income tax withholding, or Box 1 of Form W-2, and would not be included in Boxes 3 or 5 of Form W-2 for Social Security or Medicare, nor would it be subject to FUTA. Because the reimbursements are made from a Section 105 HRA "Plan" in the name of the S Corporation, the individual insurance premium is an above-the-line deduction, taken off of gross income even if the Owner doesn't itemize. The Section 105 HRA method saves the Owner all the income tax (bonus #2), plus all the 15.3% self-employment tax (bonus #3), plus the FUTA tax (bonus #4). No taxes at all, plus you have the added benefit of tax-free out-of-pocket medical expenses.

For more information contact Gene Ennis, Certified in Flexible Compensation, and President of Core Documents, Inc. (www.CoreDocuments.com) by calling 1-888-755-3373.

Disclosure: Core Documents, Inc. does not provide tax or legal advice. Because the ideas expressed in this press release depend on compliance with income tax guidelines set forth in: IRS Headliner 163 and 41; and different portions of IRS Sections 1372, 162, 105, 106 and 707; and Revenue Ruling 91-26, you are advised to consult with your tax advisor for such guidance before implementing any ideas expressed herein.

Onlypunjab.com

The Best Benefit in The Travel Insurance Industry Just Got Better Publish Date : 11/5/2007 7:25:00 AM
TravelSafe Insurance upgrades it's industry-first "Cancel For Any Reason" travel insurance benefit to cover up to 100% of travelers' non-refundable trip cost.

SASid and Markel Insurance Company Introduce Short Term Medical Health Insurance for Individuals and Families Publish Date : 11/5/2007 7:23:00 AM
SASid, Inc. and Markel Insurance Company announced today that they have joined together to offer short term health plans for individuals and families.

PrintsMadeEasy.com Announces Plans for New Line of Real Estate Business Cards Publish Date : 11/3/2007 6:26:00 AM
PrintsMadeEasy.com, the global leader in online printing solutions, today announced plans to release a new series of templates and designs for real estate business cards in 2008.

Sompo Japan Insurance Company of America Announces Selection of Millbrook and Oracle® Business Intelligence Solution Publish Date : 11/2/2007 7:16:00 AM
Millbrook Incorporated is pleased to announce that Sompo Japan Insurance Company of America has selected a solution based on...

Life Insurance Opportunities in Qualified Plans to be Focus of Nineteenth Annual Henry A. Deppe Lecture Publish Date : 11/1/2007 7:07:00 AM
Five financial experts will participate in Life Insurance Opportunities in Qualified Plans as part of The American College's nineteenth annual Henry A.

Lighthouse1 Announces CDH Event of the Year Publish Date : 11/1/2007 7:07:00 AM
Lighthouse1, the industry leading provider of consumer driven healthcare administration solutions, announced that Revolution '08, the first Lighthouse1 OnDemand™....

Partners Advantage Insurance Services, Inc. Merges with Maxx Financial Partners, LLC Publish Date : 11/1/2007 7:07:00 AM
Partners Advantage Insurance Services, Inc., and MAXX Financial Partners, LLC, announced today the completion of their merger, creating one of the ...

Website Exposes Dirty Little Secret of Private Mortgage Insurance (PMI) Publish Date : 11/1/2007 7:07:00 AM
Go.Toby.com, the popular real estate news and information website for Palm Coast, Flagler County, and Northeast Florida posts an article revealing ...

Silanis Sets the Record Straight on Electronic Contracting Myths Publish Date : 11/1/2007 7:07:00 AM
Leading electronic signature provider Silanis Technology has posted a recording of its recent Webcast, "Electronic Contracting - Dispelling the...

Employers Tackling Health Care Challenges with 21st Century Benefit Design Publish Date : 11/1/2007 7:07:00 AM
A new approach to health care in the 21st century should address the most acute challenges of our time and chart a new course through better use of data, ...

Total Results : 3507
More News (Opens in New Window) : [1] 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 Next Page

Canada News

Gadget News

Infotech News

Europe News

Health News

Middle East

Sports News

Advertising News

America News

Application News

Asia Pacific

Software News