Have Tax Questions? Ask a Tax Expert for Answers ASAP
Good Evening -
I am married with 2 children and have had a personal health insurance policy for 4 plus years now. I am the sole shareholder and sole employee of 5 year old C Corporation. I have always paid my personal insurance $4000 annual for family with my personal post taxed income. I was recently advised by a tax person that the C Corporation could pay that as non taxable benefit. My question is if you agree with that
Yes, absolutely - the Corporation can pay for your health insurance before taxes.
and would I have to change the structure of the insurance policy since its in my personal name
Your insurance broker would have to answer that question for you. However, there usually is a change in the policy when a health insurance policy is purchased through the corporation.
and how would the C Corp pay that $4000, direct to Aetna, reimburse to me.
Actually, you could pay the premiums yourself and have the corporation reimburse you if you wanted to keep the same policy.
I just don't want this to become an audit issue 5 years (or 25K) down the line where it appears I did something wrong in the foundation of it.
A certain number of returns are audited anyway, but paying reasonable amounts of medical insurance premiums is not a particular flag.
I can't call Aetna and ask them to change the policy name to my business name as I would lose the policy as is.
Don't call Aetna- call a broker and see what they can offer you. A lot of times, policies offered to businesses are substantially better and less expensive than policies offered to individuals.
I understand that if I take on additional employees that the C Corp would be obliged to offer the same or similar benefit.
Yes, but if you didn't want to do that, you could discontinue the benefit if you hire employees.
Related to Question 1. The same tax person stated that the C Corp can fund the HSA savings account that I have been funding with personal post tax funds.
However, I am not sure this is necessary since the AGI section on 1040 line 25 removes this from my taxable income.
If you are itemizing, and have enough medical expenses, probably not an issue. People who do not itemize or do not have medical expenses that are sufficiently high benefit from this.
In other words the business funding it may not have any advantages and may pose a possible disadvantage during an audit OR if another employee is hired where the C corp would have to match that contribution amount.
HSA accounts are self-directed - in other words, the corporation isn't contributing or matching.
I really want a someone pretty certain about these answers as it will be setting the foundation to years ahead.
THIS IS FOR FLORIDA.
You are asking federal tax questions. I'm an attorney with a certification in tax law, and I am admitted to practice in federal courts.