Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next
Author: lunchbeast Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121096  
Subject: Self-employeed health care tax maneuver Date: 11/28/1999 3:11 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I am a self-employeed consultant using an S-corp organization for my company. Because of escalating costs and high deductables, along with some elective surgery I'm considering, I've been looking at replacing my current health care policy with an MSA. I was recently discussing health care insurance costs with a friend who is also a self-employeed S-corp, and he explained how he handles his insurance.

Instead of funding the cost of the insurance policy at the employee level, he has made health care a 100% company-paid benefit. All health expenses (health insurance, prescription and non-prescription medication, bandages, office visits, transportation, etc.) are completely paid by his company. He then passes the cost of only the health care policy along to the employee as a taxable benefit. His company absorbs the extra costs above and beyond the coverage of the insurance policy and takes tax deductions for them.

For example, his company picked up the tab for the cost of braces for his daughter beyond what the insurance covered, and his company also picked up the cost of LASIK eye surgery (for nearsightedness) for him. He has his company then withhold taxes on the premium for the health insurance, just as it might for a bonus or vacation pay. In essence, all of his medical expenses are paid with pre-tax dollars, without limit, and without the incumbrance of the very high deductable of an MSA

I ran this by a CPA, and her feeling is that this is all OK as long as all employees are treated the same. Since he's the only employee, there's no problem there. My feeling is that I'm overlooking something here, and that this would not be looked upon favorably by the IRS, if for no other reason than the compensation on which taxes are withheld may not accurately reflect the value of the benefit

I'd appreciate any insight anyone might have on whether or not this is really legitimate.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement