One Person S Corporation Health Insurance Deduction at Risk, Advises - Articles & News About Health

One Person S Corporation Health Insurance Deduction at Risk, Advises - Articles & News About Health

Stop Parking Domain NamesDevelop Your Domain Names

One Person S Corporation Health Insurance Deduction at Risk, Advises

Bradenton, FL (PRWeb) December 22, 2006 -- Core Documents, Inc. the nation''s primary source for affordable Section 125 and Section 105 HRA plans claims they have a solution to the problem IRS Headliner 163 has created for one person S corporation owners. See Core Documents at

First, let''s outline how S corporation owners took health insurance deductions before IRS Headliner 163. For fringe benefit purposes, the S corporation is treated as a partnership and owners are treated as partners under IRS Section 1372. And under IRS Section 162(l)(5), because the S corporation owner is treated as a partner, he is treated as self-employed and is able to deduct health insurance premiums as above-the-line deductions on the 1040 Form, for income tax deductions only. The 15.3% self-employment tax still applies.

After IRS Headliner 163 the sole shareholder/employee or owner of an S corporation who purchases health insurance in his or her name instead of the name of the S corporation will no longer be able to take an above-the-line tax deduction. To take the above-the-line deduction health insurance must be purchased in the name of S corporation (a group plan). The deduction for policies purchased in the name of the sole shareholder/ employee will now be an itemized deduction subject to the 7.5% AGI limitation. Which means most owners will lose all or most of the health insurance deduction.

In an effort to make this as simple as possible as it relates to deductibility: Group Health Insurance - Good; and Individual Health Insurance - Bad. However, Core Documents has a solution. Before I show you the solution let''s clarify exactly how IRS Headliner 163 will affect the S Corporation Owner''s tax return in more detail.

Two different health insurance tax consequences are created by IRS Headliner 163:

Group Insurance: The owner purchases group health insurance in the name of the S corporation; the company pays the owner''s premium; the premium payments are deducted by the company as W-2 income to the owner; income is reported in Box 1 of the W-2 for income tax; and Boxes 3 or 5 of W-2 as wages for Social Security, Medicare and FUTA tax. Because the health insurance is a Group Plan (key point) it can be taken as an "above-the-line" 1040 deduction from gross income. Above-the-line simply means the deduction can be taken off the top of gross income regardless of whether the owner itemizes deductions. This method saves only income tax. The owner still pays the 15.3% self-employment tax (aka Social Security & Medicare) and FUTA tax on insurance premiums.

Individual Health Insurance: The owner purchases health insurance in his or her name; the S corporation pays the premium; the premiums are deducted by the company as W-2 income to the owner; income is reported in Box 1 for income tax, Boxes 3 or 5 of W-2 for Social Security, Medicare & FUTA taxes. Because the health insurance is in the name of the owner, (key point) the owner would have to itemize the deduction which would be subject to the 7.5% AGI limitation. The 7.5% AGI limitation only allows the Owner to deduct expenses that exceed 7.5% of his or her Adjusted Gross Income (AGI). (Example: owner has $100,000 AGI; 7.5% = $7,500; health insurance deductions will only be allowed in excess of $7,500). The owner pays income tax on most of the premium, and 15.3% self-employment tax on the entire premium. Almost no deductibility at all.

Core Documents'' Solution: The S corporation owner who is also an employee should establish a Section 105 Health Reimbursement Arrangement or HRA at for a one-time setup fee of $99. The Section 105 HRA is technically an ERISA health and welfare plan, (self-funded health plan with limited liability). The HRA is sponsored by and in the name of the S Corporation which meets the requirement of IRS Headliner 163 for a "group" plan. Under IRS 213(d) the Section 105 HRA plan allows deductions for individual health insurance, plus an added bonus of out-of-pocket medical, dental and vision expenses (bonus #1). IRS Headliner 41 says if payments to the Owner/employee are made under a "Plan" (such as the Section 105 HRA Plan) the amount would only be subject to income tax withholding, or Box 1 of Form W-2, and would not be included in Boxes 3 or 5 of Form W-2 for Social Security or Medicare, nor would it be subject to FUTA. Because the reimbursements are made from a Section 105 HRA "Plan" in the name of the S Corporation, the individual insurance premium is an above-the-line deduction, taken off of gross income even if the Owner doesn''t itemize. The Section 105 HRA method saves the Owner all the income tax (bonus #2), plus all the 15.3% self-employment tax (bonus #3), plus the FUTA tax (bonus #4). No taxes at all, plus you have the added benefit of tax-free out-of-pocket medical expenses.

For more information contact Gene Ennis, Certified in Flexible Compensation, and President of Core Documents, Inc. ( by calling 1-888-755-3373.

Disclosure: Core Documents, Inc. does not provide tax or legal advice. Because the ideas expressed in this press release depend on compliance with income tax guidelines set forth in: IRS Headliner 163 and 41; and different portions of IRS Sections 1372, 162, 105, 106 and 707; and Revenue Ruling 91-26, you are advised to consult with your tax advisor for such guidance before implementing any ideas expressed herein.

This press release has been reprinted from PRWEB per the terms and conditions of the copyright notice.

Baby Health Care, Child Health Tips, Parenting Guide, Baby Strollers, Massage

Health Care and Health Insurance Costs Can Be Controlled Through Lifestyle Choices

As you probably know all to well, the cost of healthcare and health insurance premiums continue to increase at levels substantially above the general inflation rate. The reasons given for these extraordinary cost increases are numerous and include: technological advancements in the medical field, increased demand for medical services and prescription drugs, the aging of the population, cost shifting caused by the uninsured and governmental reimbursement rates, state and federal mandates, and costs associated with medical related lawsuits.

The PIE Diet - Mental Health Food

"The PIE Diet - Mental Health Food" reveals an award-winning program for individual growth, which has previously been available only to the corporate world. It outlines necessary action-steps to make the "law of attraction" work for, and not against, individuals and corporations. Contained is a easy step-by-step process for conditioning the subconscious mind to both envision and enable control of who we are, what we do, and what we desire to achieve with our lives.

Health Care - If You Love Health Care

All about Health Care: Intended For Individuals

Hormel Health Labs Launches Health Food Website for Seniors

For the seven million elderly Americans receiving home-based medical care, staying healthy just became easier. Hormel Health Labs, one of the nation''s leading providers of nutritional products geared towards seniors, has announced the launch of its new ecommerce website, . The new site makes it easy for caregivers to order essential, healthy products to improve the lives of their loved ones.

Natural Health Care and Holistic Dog Health

Holistic dog health care has emerged as a natural way for pet owners to ensure that their dogs are healthy, living long, happy lives well into old age. Perhaps the most important aspect for a dog''s health would be a unique blend of vitamins, minerals, and other nutrients to make sure the joints, organs, and digestive systems make work in harmony as well with the skin and coat being healthy. A diet of meat, vegetables, and whole grains without any processed foods or unnecessary fillers is usually recommended when following the holistic approach to dog care.

Texas Health Insurance ý Managed Care Health Plans

Managed care health plans work as a network or group of medical professionals and hospitals that are contracted with the health plan This helps insurance companies and health care providers work together to give patients the care they need

New Health Website Provides Health Tips About Alternative Natural Health Care

Summary: In answer to the need for helpful information on alternative natural health care a new site, has been launched. The site provides quality information regarding alternative health issues and is the brainchild of Mike Hepburn.

Vitamin Diet Patch Now Available for Health Food Stores from NAZCO Wholesale Herbal Supplement Dropshipper

Health food supplement diet patches are a blend of herbal nutrients, offering safe and effective weight loss diet application like a nicotine diet patch. The supplements diet patch allows the herbal formula on the diet patch to enter directly into the bloodstream, suppressing appetite between meals while providing weight loss, diabetes and chronic fatigue relief support and increased energy level on the go.

St. George Complimentary Alternative Health Care Offers Free Wellness Scans During Focus on Nutrition Month

The desire to get healthy and stay healthy is the primary reason more and more people are turning to natural health care, or complementary and alternative medicine, according to this St. George Hinkle practices alternative medicine utilizing personalized biofeedback using ZYTO technology, nutraceutical assessments, medical foods, bio-identical hormone evaluation, chelation, lifestyle changes, and body composition analysis.

Doctor-led Health Care Organization Offers Free Web site, Membership to Mental Health Counselors

The International Assoc. of Dental and Medical Disciplines has a health care plan that brings together all medical disciplines and calls for them to work together to provide the best possible whole-body care.

Health Insurance, Health Care Issues Now Top Rated Topics for Radio Listeners According to Arbitron

The Health Insurance Advocate Show, With Cary Hall, Achieves One Year Ratings Increase of 119 Percent in Western Missouri, Eastern Kansas Market and 576 Percent in Wichita, Kansas, Market By Delivering Clarity and Eliminating Confusion

A Diet Primer For Health Food And Vitamins

Quite often, we want to eat healthier but don?t know exactly how to start. Sometimes food you think might be good may in fact not be right for you, and vice-versa. This article looks at some simple diet changes you can start to make right away that will improve your overall health.

Health Care Insurance in Texas ý Managed Care Health Plans

A managed care health plan works as a network It is a group of medical personnel and facilities that have a contract with this particular plan

Health Care Proxies, Advanced Health Care Directives, And Living Wills

Any competent adult has the right to accept and/or refuse any medical treatment. Nobody disputes that. Doctors are only allowed to tell patients the pros and cons of treatment, they can offer advice, they can not order a patient to accept treatment. Problems start when the adult can no longer communicate or is no longer considered mentally competent enough to make their own decisions. When this happens other people step in and try to decide what type of medical treatment the person would want for themselves.