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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3914
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I want to qualify in 2013 for taking the "self-employed" health

Resolved Question:

I want to qualify in 2013 for taking the "self-employed" health insurance deduction for a >2% shareholder employee. I understand the rules for doing so, but I have one remaining question about process of quarterly reporting. Let's say you have your s corp pay you a one time annual salary in 3rd Qtr each year. But let's say that every month, as a shareholder/employee, you are paying your own premiums and the business is reimbursing you (and it is all done according to the rules to make it an "accountable plan"). Here is the question, since no FICA taxable salary is paid in quarters 1, 3, and 4 how is premiums reported? In other words, in practice, in the "real world" where things are messy, do accountants typically just wait until the end of the year to sum all the premiums and report them on the 4th Qtr 941 and 940? Or? I don't mind reporting it in the quarter it actually occurred if that is necessary since the 941, CA DE9, and CA DE9C are being sent anyway, but just wondering how to make this work for 2013 since tomorrow is the last day of the 1st quarter. Thanks!
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

OK, I've waited this long because (1) I am not a bookkeeper (Don't really deal with the day-in day-out payroll kinds of issues) and (2) having answered two questions for you fairly recently, though I wouold give someone else a chance ... but it seems this ones been sitting here a while ...

NPVAdvisor :

I think, from a jurisdictional perspective, CALIFORNIA would rather you jsu, as you say "I don't mind reporting it in the quarter it actually occurred if that is necessary since the 941, CA DE9, and CA DE9C are being sent anyway" ... report s as incurred

NPVAdvisor :

From a federal perspective, in terms of it being an accountable plan and qualifying for the deduction, waiting and reportin at the end of the tax year will satisfy

NPVAdvisor :

Hence, the conservative approach would be to reporting it in the quarter it actually occurred

NPVAdvisor :

And to vacillate one more time ... both IRA and CA work on a tax year basis, when it comes to deficiencies, so doing it yearly will probably "raise no flags."

Customer:

Ok, if it can wait until the end of the year, 4th qtr, that might be easiest. I might just move the annual salary check to 4th quarter too. I had been doing it 3rd quarter so that the payroll liabilities didn't leak into the next year as a cash basis taxpayer. Recently I learned though, that payroll liabilities (on the employee side) are deductable in the year incurred kind of like credit card charges, so it wouldn't be a big deal to move it all to 4th quarter. That is tangential, but I thought I'd through it out there anyway.

NPVAdvisor :

sorry "IRS"

NPVAdvisor :

You beat me to it

Customer:

 


:)

Customer:

 


Ok, so I don't have any authorite cites for it being ok to wait, but I like the sound of it. I have a feeling there aren't any anyways on this issue. The IRS only this year figured out how they are going to handle health insurance premium reporting (last year it was wait and see we'll forgive you if you get it wrong)

NPVAdvisor :

Moving the check to the 4th qtr would be in line with that )malority, I bet) of folks who have to because of unpredictability of profit purposes

Customer:

 


That brings up a good point, health insurance premiums are deductable up to FICA wages for a >2% shareholder/employee. They don't have the profit limit that other truly self employed businesses have.

NPVAdvisor :

yep, reporting it in the quarter it actually occurred ... is

NPVAdvisor :

yes , tat's right

Customer:

 


just putting that out there for people, i've actually seen it wrong in a tax book

NPVAdvisor :

year end "reconciliation," if you will is very commone ... expected

NPVAdvisor :

yep

Customer:

 


ok, great, i'll do that, the only thing i won't like is that i don't like crunching everything into the end of the year

NPVAdvisor :

tax procedure and the actual law sometimes take a while to "reconcile" to use the term again

NPVAdvisor :

... underatnd

NPVAdvisor :

just really gear up for it, just after 3rd (to state the obvious)

Customer:

let's say i did decide, for the sake of learning, to do it quarterly, how would you even do it? it would seem weird to file 941, 940, and DE9, DE9C with gross wages and then specify on those forms that none of it is SS or Medicare wages.

Customer:

 


"for the sake of learning" in our conversation here, not necessarily for actually doing that way

NPVAdvisor :

Again, I will qualify that I am not a bookkeeper ... but I would think that you project to year-end and pro-rate

NPVAdvisor :

What tax package/books software do your use?

Customer:

right, ok, well, anyway, thanks, XXXXX XXXXX probably go with end of year in 2013; one other note is that in taking the deduction it is nice that it pumps up your salary for the IRS computers in relation to distributions without being subject to FICA


 

Customer:

 


I CFS for payroll and UltraTax CS for tax

NPVAdvisor :

Intuit has some excellent help for quickbooks for there kinds of issues

NPVAdvisor :

That's right

Customer:

 


I use MYOB for accounting

NPVAdvisor :

I CAN say this from some experience.... mmany of my business owner client wait until year end to do everything from paying themselves to planning for the next year

Customer:

 


yeah, i've noticed that

NPVAdvisor :

More information means better projections

Customer:

 


yep

Customer:

 


hey, thanks again so much

Customer:

 


have a nice evening

NPVAdvisor :

YW, hope this has helped

Customer:

 


it did

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3914
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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