Medical Reimbursement Plan

Client owns 100% of what was a C Corporation which we changed to an S Corporation about 5 years ago. At the time, I told him the advantages and disadvantages. One of the disadvantages was that he lost the medical reimbursement plan. He felt this was no big loss because he wasn't a believer or user in traditional medicine. Now, he's changing his mind.

He asserts a "friend" has an S Corporation where the tax preparer deducts all of his out-of-pocket medical costs on the business return. To my mind, this is a medical reimbursement plan (MRP).

As we know, a MRP is one of the few benefits available to a C Corporation not available to other forms of business. In order to be a "qualifying plan", it must be in writing, it must not discriminate, it must provide the same dollar coverage for all employees, and it must not apply to owners of more than a minority of the interests in a partnership or S Corporation.

For reasons I have yet to determine, my research software is not working today. Therefore, I need some assistance in finding the chain of citations which support this.

I am aware Client could establish an HSA, an HRA, possibly even an FSA. We may be having that discussion in the near future. I am also aware we could "break" the S Corp and return to C status. All the reasons we got out still apply.

Your assistance is appreciated.

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