Tax Law (Questions About Taxes)/C corp info
I've been reading most of you past responses and I'm hoping you can point me in the proper direction. I'll give a little back ground. I have a C corp in CA and am the only employee. I'm a physical therapist and I contract my services for reimbursement to my corp( Body Fit Plus). I've been running the corp since 07'. My corp brings in about $106,000 per year for my services. I've pretty much been using all the funds earned to pay my (salary $80,000 + $24,000 for office and vehicle lease).
Here's where my dilemma starts. I signed a new contract in November that is going to substantially increase the Corporation's income to 250-300k/ year for a 2 year contract period.
I've been combing through a ton of C corp tax info/ fringe benefits to decrease tax liabilities. I've found a few deductions that I believe I can use such as the $5,000 for child care, solo 401k for my self and my wife, medical reimbursement, section 179 motorhome purchase deduction for mobile Physical Therapy, vehicle and office reimbursement.
Sorry so long winded. My question is: My wife's employer supplies our medical/ dental insurance for which we pay approx $1000 a month. Can my corporation reimburse me and deduct for the $1000 we are paying monthly?
Secondly, I'm pretty convinced that I'm going to need some structuring advice to limit my taxation liabilities. I'm hoping you can help me with this as well.
Thank you in advance,
ANSWER: 702-792-3392 or
If the corporation is obligated to pay for the medical expenses for your family then it can cover not only your premium, but also your deductibles, co-pays, prescriptions, non-prescriptions, etc.
How do you obligate the corporation? Resolutions. If the Directors of the corporation meet, agree and document that it is the goal of the corporation to provide a benefit, then the corporation can provide that benefit.
I look forward to talking with you.
give me call.
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Thank you greatly for your reply. Are you referring to a MERP that needs to be drafted for my corp? Since I am the sole officer of my corp, I'd imagine this should be pretty simple. Does the MERP resolution need to be notorized?
ANSWER: Well, medical expense reimbursement program is a little snooty for us. It is simply a resolution that defines what the corporation agrees to provide. No, resolutions do not need to be notarized.
I have a sense that you have a good handle on deductions and expenses. But now that your cashflow is increasing, what is your plan to deal with profit? Last year the corporation didn't have any according to your 80K/26k.
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Resolution it is. So would I just have to word the resolution to state my corp will reimburse any medical premiums for my family, even though my wife's company is supplying the medical benefits and the 1k is being deducted from her check before taxes?
As far as profits go, From what I'm reading the section 179 deduction is going to be extended to 200k with the 2014 tax reform act. So I'm crossing my fingers there, which would allow me To purchase a mobile physical therapy motor coach for 80-100k, 12-15k for medical premiums/ expenses, 5k for child care, 24k for office and car lease, 80k for salary, and 35 k for solo 401k.. I'm thinking this will leave me with 15-40k left in the corp. I don't have a plan for tose funds yet. Any suggestions?
Our perspective is a little different. The phrase our office is:
"Deductions are not GOOD, deductions only make bad things less bad."
But, many have been convinced by their accountant to load up on deductions so they can reduce their taxes. In college I had a friend that was successful in a business that he needed to by a new car so he could get a deduction. He didn't really want the car, but he thought he needed to buy if for the tax break.
I'm not one to encourage spending just to spend. If you really want something then you should get it regardless the tax consequences, but don't make decisions only for tax effect.
For instance, a common recommendation is buying rental homes for the tax benefit. What is the benefit? A LOSS. Whoohoo we are now a night time plumber and weekend landscaper so that we can reduce our taxes a little. That seems like a lot of work just to beat the IRS out a few bucks.
I have concerns about reality hitting your motorhome plan. If you want a motor home, then you should get one, Damn the taxation. But if you are spending money on a mobile vehicle just so you can not a pay some taxes, then you are working too hard and spending ALL your money just so the IRS doesn't get some of it.
Or if you are going to renovate it to be a transportable therapy station and that will be profitable, I support you 100% I love innovation in business.
For those that are "deduction hunting" we have done the research and found probably the simplest, most flexible deduction available, and it is virtually unlimited. In fact it only takes a few lines of handwritten text and a signature, and you can have as big of a deduction as you want.
But again, I don't think deduction hunting is a good idea.