I run a traditional 'C' Corporation in Virginia that I setup to sell
my consulting services and to pass my contracting through with the
thought of possibly growing into more then just myself. As such I am
currently its only employee and shareholder, President and Janitor.
One reason I chose to structure my enterprise as a Corporation rather
then a 'S' or self employed 1099 was for greater flexibility in
benefits and deductions. Specifically, it is my understanding that I
am able to fully 100% reimburse all of my personal (spouse and child
included) medical expenses (personal health insurance, co-pays, doctor
invoices) through my business and have those costs then written off
(not taxed) as a business expense when tax time roles around.
Please validate my understanding with links to appropriate articles
(irs or other) and tax code.
Additionally, what accounting requirements might this entail, is there
additional filing required by the IRS? Is there a certain requirement
that this be handled by an outside agency such as a benefits
management group?
I understand that you may not be a lawyer or accountant and that if
you were your advice/suggestions/input would not be binding. |
Request for Question Clarification by
pafalafa-ga
on
15 Aug 2004 08:44 PDT
Hello Chris,
As a self-employed Google Answers Researcher/Janitor, I'm always
interested in the tax implications of having my own business, so your
question is a most welcome one.
From what I can see thus far, personal health/dental insurance is
deductible for the whole family, regardless of the type of business
set-up. The advantages of a C corporation only come into the picture
if you go the MRP route -- medical reimbrsement plans.
Have a look at this recent article on the topic:
http://www.smallbusinessnewz.com/2004/0323.html
and let me know if it answers your question for you. If it does, I'd
be glad to track down the source information as an answer to your
question (IRS publications, etc) so you can have full documentation on
this topic.
If the article doesn't fully address your questions, let me know what
additional information you need, and I'll see what I can do.
pafalafa-ga
|
Clarification of Question by
chriscook-ga
on
15 Aug 2004 13:39 PDT
Yes, the few paragraphs near the bottom referring to establishing a
one person 'C Corp' is right on the money. Please follow up along
those lines.
Specifically, what I would like to see is some detail to flush out the
article's sentence "The MRP must be established according to strict
rules of both the tax code and the Department of Labor." So provide me
some more information on what regulations I need to follow and what
record keeping and paperwork I need to save.
Thanks much.
|
Request for Question Clarification by
pafalafa-ga
on
16 Aug 2004 10:56 PDT
Hello Chris,
Glad to hear that article is on the right track. Please allow me a
few days to pin down the relevant code and related information from
the IRS and elsewhere. I hope to be able to post an answer by the end
of the week.
Stay tuned...
pafalafa-ga
|
Request for Question Clarification by
pafalafa-ga
on
19 Aug 2004 11:58 PDT
Whew.
This has turned out to be tougher than anticipated.
Here's a link to the actual IRS regulations for the medical reimbursement plans:
http://www.irs.gov/pub/irs-utl/tres_reg-1105-11.pdf
Problem is, unless you're a tax expert, I doubt you will have the
patience to slog through all this and try to make sense out of it.
I'm still looking for more of a "plain English" explanation, and I'll
let you know if I come up with anything.
Mean time, you may want to run the IRS materials past your accountant
for a professional opinion.
pafalafa-ga
|
Clarification of Question by
chriscook-ga
on
20 Aug 2004 06:52 PDT
pafalafa: Thanks for your work on this, that PDF does seem to address
the issue properly, but please let me know if you find any
supplemental information. I like to think I have a good head for these
things so I'll slog through the code in that regulation and try for a
better understanding.
financeguy: I understood that the plan would have to be offered
equally to all employees, but as it stands now that isn't an issue.
Should (dare I say when) the corporation grow beyond myself the issue
will have to be readdressed. I had looked at the HSA as an attractive
alternative but was put off by what appeared to be a requirement that
the plan be administered by an outside party. Please correct me if
this is wrong.
In the end of the end I'm a die hard do it yourselfer.
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