NASSAUSUFFOLK

My client is a professional corporation and files an 1120 (c corporation). The only employee's are the sole shareholder/officer and his wife. He works full time and his wife is an part time employee. The corporation has a group health policy since they are considered two employees. Under the new health care law, they are considered only one employee and are not entitled to have a group policy. Therefore they must purchase individual policies.

Question: If the corporation pays the cost of the individual polices, is the payment a deductible expense for the corporation and is this tax free to the employees?

thank you.

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Brian Friedman
BRIAN L. FRIEDMAN, CPA PC
Plainview NY
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2. Maximize medical deductions

Owners of a C corporation can receive health coverage on a tax-free basis. The corporation can fully deduct its premiums. In contrast, S corporation shareholders must report the benefit as income and then deduct the premiums from gross income on their personal returns-this is merely a wash. Self-employed individuals also deduct their premiums from gross income on their personal returns; they cannot reduce their business income by the premiums allocable to their personal coverage and wind up effectively paying self-employment tax on the premiums.

A C corporation can also set up medical reimbursement plans to pay fixed dollar amounts for out-of-pocket medical costs of employees. As long as the plan is nondiscriminatory (i.e., does not favor owners), the reimbursements are not taxable to employees, while they are deductible by the corporation. One client of mine who had a severe disability was able to handle many of his medical costs through the reimbursement plan that covered his corporate employees -- himself and his wife.

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Gary Geisenheimer
EA
Gary Geisenheimer
Woodbury NY
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Original Message:
Sent: 06-24-2014 12:09
From: Brian Friedman
Subject: healtcare

My client is a professional corporation and files an 1120 (c corporation). The only employee's are the sole shareholder/officer and his wife. He works full time and his wife is an part time employee. The corporation has a group health policy since they are considered two employees. Under the new health care law, they are considered only one employee and are not entitled to have a group policy. Therefore they must purchase individual policies.

Question: If the corporation pays the cost of the individual polices, is the payment a deductible expense for the corporation and is this tax free to the employees?

thank you.

-------------------------------------------
Brian Friedman
BRIAN L. FRIEDMAN, CPA PC
Plainview NY
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