For the past few weeks, I have received questions about the Section 105 medical reimbursement plan from my self-employed and solo C corporation owners. Below are the main points from my answers.
When you have multiple businesses, all employees across these businesses are considered your employees under the Section 105-HRA plan. If you have more than one W-2 employee, the spouse-only 105-HRA plan may not be suitable. Similarly, the plan would not work for the one-person C corporation with two or more employees.
While there are no specific regulations on the timing of reimbursements, it is advisable to reimburse expenses monthly to maintain a professional business image.
Employee spouses under the Section 105 plan can receive W-2 wages that provide solid proof of employment. But a W-2 is not mandatory, and the Section 105-HRA plan can serve as the sole source of remuneration.
Premiums for long-term care policies can be included as reimbursable expenses under the Section 105-HRA plan, allowing for a full deduction without limitations.
If you receive compensation solely through the Section 105 plan without any W-2, there is no requirement for additional contributions to a SEP IRA on your behalf.
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