What does a small business (4 employees) have to do, so that they can deduct employee cost of medical insurance from gross pay BEFORE tax withholdings are calculated?
Some kind of paperwork must be filed and to somewhere (state and/or FEDs)?
Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?
Replies
Look at circular E and see if it mentions it.
I am not sure if anything has to be filed.
But there might be regulators on what types of "medical" insurance can be deducted.
And with a small company there are rules for requiring "equal treatment" that need to be followed.
But this is something that you need to pass by a local expert. Find a CPA that is familar with employee benefits.
And talk to your insurance salesman. Now I would not take his word for anything about this. But he might have some information or might be able to point you to local experts.
William the Geezer, the sequel to Billy the Kid - Shoe
Phil,
I went through this about two years ago and what it turned out to be was that I needed to certify that the company was eligible to deduct before taxes. My insurance broker sent me some document, I signed it and put it in my files. That was it. My CPA made it sound like I needed an act of congress-not so. Call your HI broker and have them generate the letter.
Bruce
What makes your company eligible? Or NOT eligible?
Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?
This was where I placed a little blind faith in my broker. They said since we offered insurance to everyone we were eligible and the "form" was a self certifying letter stating we believed we were eligible. I got very frustrated because my CPA said I need the "certification" but had no idea on how I could get it.
Bruce
"They said since we offered insurance to everyone we were eligible "This is were it gets trickly.I don't know about insurance, but with retirement plans they you have to be able to show that they are non-discriminatory and don't favor owners. And that is based who SIGNS UP. Not just "offered"..
William the Geezer, the sequel to Billy the Kid - Shoe
The term to search for in your google searches is "Cafeteria Plan"
You can have a cafeteria plan that contains only health insurance -- it's called a premium only plan (POP Plan).
http://www.irs.gov/govt/fslg/article/0,,id=112720,00.html
http://www.physiciansnews.com/finance/1096.html
http://www.qbalance.com/Do-it-yourself-cafeteria-plan.htm
Note: The IRS page above is confusing as heck. The Physicians News page is less so, though it doesn't include all of the details that you need. The last page includes a link to software you can rent or buy to administer a cafeteria plan yourself. I've never used it, can't say if it's any good or not, but it's aparently been around since DOS days in the late 80's.
Rebeccah
Thank you Rebeccah,
That what we have is a POP plan.
Bruce
Thank you for all the replies.
Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?
Call your insurance man and ask him for help setting up a cafeteria plan. You wont be able to set it up yourelf.You get out of life what you put into it......minus taxes.
Marv
Have your company set up a cafeteria plan whereby the cost of tax deductable items are set into a fund and a check written without taxes.. Owners love those plans because they avoid paying witholding and social security costs and save themselves money in the process.