Discussion:Medical Reimbursement Plans 105b

Can I have a medical reimbursement plan for the shareholders and treat it the same way I treat the insurance premiums? If so would it be subject to fica and medicare taxes? Thank-you

Check out this link. Thanks. http://www.coredocuments.com/core105.php

If so is it deducted as additional wages and treated the same way as insurance premiums that I can deduct it on page 1 of my 1040?

Also according to IRS headliner 41 it states htat pauments made under a plan for the s corp. would only be subject ot income tax withholding and not Fica and medicare. What do they mean by a plan. Is this considered a medical insurance plan or do you have to have a 105 plan?

If an S-corp has a HDHP and also contributes (within the guidelines) to all employees HSA account the amounts for the more than 2% shareholder are deducted as wages in the corp but are not subject to FICA, FUTa, etc. JoAnne

1) An HRA benefits the >2% S/H because by having the HRA in the Company name, now the >2% S/H can have the S Corp pay the premium, add it to their wages, and then the S/H(s) may take an adjustment on the 1040.

In addition, the S Corp MAY reimburse all employees (including the S/H) medical expenses as allowed Pub 502 as a fringe benefit. However, these amounts would get added to the W2 of the >2% S/H. Here is where I am troubled. Pub 502 states that if you are reimbursed for medical expenses through an HRA, then you have to reduce your medical expenses by the amount you were reimbursed. But if you are required to include this on your W2 as a >2% S/H, that would not make sense. Seems like the reimbursements would be included as income and then expenses would be reduced -- a double hit. Maybe I read that part incorrectly.

2) Benefits Schedule C people who employ their spouse because now the Schedule C gets a deduction for the reimbursements which are eligible under Pub 502 for both the spouse and the Schedule C proprietor. Not added to the spouses wages (spouse must be employed by the Schedule C).

The HRA could also be used in a C Corporation as a Corporate Fringe Benefit.

If you reimburse your employee for medical bills under a 105B, you take this an employee benefit expense.

If your wife is an employee, you can deduct medical bills for your wife, children and even yourself, if you a Schedule C, since your wife is an employee and HRB plans take care of employee, spouse and children.

Here is where I am cookoo is if you are a S-corp employee/owner and you pay medical expenses for yourself with S-corp's money, is this a medical expense classified under employee benefit plans.

The employee then can take the above the line deduction for the health insurance, but not for reimbursed medical expenses (paid to him from his S corp on his W-2).

Like JR said, the medical expenses are still subject to the Sch A limitations and then the reimbursements offset that, but the health insurance portion of the box 12 income on the w-2 can be taken above the line for < 2% s/h's...at least right now.....or so I am thinking :)

Maybe I worded it wrong, but yes, take the wages, increase your taxable earnings and then take the 7.5% limitation on the earnings for the deduction.....

I know what I mean when I say what I mean, but who knows what I really meant when I said it? hehehe

Also, regarding the Schedule A....are the med expenses included on Sch A reduced by the amount of reimbursement from the HRA? Not clear on this. THANK YOU

Sch A what I meant (maybe not what I said, but what I mean)...client has 5K of medical expenses...take the 7.5% limitation...take from that the reimbursements, if he is left with ANYTHING else, he can deduct it....

If my colleagues are NOT taking the SE health insurance deduction for greater than 2% s/h; speak now please....we have gone around this and around this. No distributions to pay for it, pick it up as wages, take above the line, below the line, etc. etc. etc.....

Is it 5:00? YEAH!!!

More than 2% shareholder I add health ins to the w-2 then take above the line.

Now, If they had a HRA I think I would add to income then take on sch. A - period.Not reduce by reimbursements since it was added to W-2.

HSA - more than 2 % shareholder contributions from the company add to w-2 then ?????? afterthought as I typed. (probably not health ins) then deduct on A also.

P.S. maybe we won't burn up if we get this tropical whatever(hehe)

When the goverment talks of a plan do they mean just an medical insurance plan or a WRITTEN plan subject to the rules of 105b. If they meet this PLAN the insurance premiums are not subject to fica and medicad. The 105 guy has been telling me with a > than 2% s corp s/h as long as you have this plan (which he refers to a 105b)HRA )you can not withhold fica and medicare. ALSO you can have medical expenses paid to shareholders and treat it as wages and then take it as an above the line deduction.I am so confused. He states as long as you have a written 105b hRA plan in the corp. you can take both the insurance premiums and medical reimbursements and pay it to the s corp shareholders. ????

Sec. 3121(a)(2)the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents),

Wouldn't this still work as a reduction of taxes you would have paid anyway, hence producing a tax benefit from a 105plan

I realize this comment above, by Riley2, is old...but I think we might have a problem with this, in the case of S-corp reimbursements of 2%-shareholder health insurance, under the ACA. The favorable 3121(a)(2) treatment involves an "employer health plan," and heretofore, the expense reimbursement arrangement constituted an "employer health plan," but I don't think it will anymore.