Discussion:Sole Proprietor as an Employee
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Discussion Forum Index --> Advanced Tax Questions --> Sole Proprietor as an Employee
Discussion Forum Index --> Tax Questions --> Sole Proprietor as an Employee
Mcfarlintax (talk|edits) said: | 25 November 2008 |
| My cleint is a LLC and will file a schedule C. He wants to be an employee to participate in a group Health (125) and 401K program. Is this possible and what is the process.
Also, can I process a paycheck for the owner and deduct all of the federal and state burdens and then report these differnet at year end? | |
Pink Pearl (talk|edits) said: | 25 November 2008 |
| Kevin must be gone for the day :) | |
| 26 November 2008 | |
| As a disregarded entity, no payroll checks for the owner. | |
| 26 November 2008 | |
| He needs to check with health care providers to see what their requirements are. Does he have employees? If not, he may not qualify for group insurance.
For your second question, no. As a schedule C he is an owner/employer/employee. He takes owner draw and pays estimated taxes.taxea | |
| 26 November 2008 | |
| The owner will not be an employee.
However, I think there is the possibility of a One Person 401(k). However, you must have no employees other than your spouse. i.e. your spouse can be the only employee (owner would not be an employee). This 401(k) would allow you to put more away than in Keogh. Source: JK Lasser 2008. I have never been a part of setting one up for a sole prop., or having a TP using this. It's late in the year to consider a 401(k). Perhaps a SEP would do the trick? | |
JackDaniel (talk|edits) said: | 26 November 2008 |
| Ok for owner to participate in the group health plan. Cannot participate in the 125 plan unless the LLC makes a check-the-box election on Form 8832. | |
| 26 November 2008 | |
| Sorry, I WAS out yesterday afternoon. I had accumulated a whole box of kittens that had to be sacrificed to the yellow search box because people don't follow instructions. | |
| 26 November 2008 | |
| Yeah, somehow I am under the impression that you can't be your own employee. So the LLC would have to elect to be taxed as a corporation, probably by filing the S-election. Otherwise. the LLC is a disregarded entity. | |
| 26 November 2008 | |
| Kevin is right again...have you searched this site for prior postings on this issue...If he is doing a Sch C, why would the wife be an employee...they are considered one person for tax purposes...I would call the LLC his and stick with the owner draw and estimated taxes...SEP and look for a "business medical plan". | |
| 26 November 2008 | |
| Even if he COULD issue paychecks to himself, why would he want to? The underpayment penalties for withheld taxes are much steeper than personal estimated underpayment penalties. The paperwork is tedious. And, as other responders have indicated, benefits available to employees are available to the self-employed in a different form. | |
| 26 November 2008 | |
| You can set up a solo K up until Dec. 31. I'm going to get around to it soom. I swear I will. | |
