I know I'm veering off topic a little bit but I had considered having her set up a single person C Corp for her freelance work she does. I had hoped that she could then write her off the amount we pay for healthcare $14K per year and also for childcare (another $14K per year) on the corporate level as fringe benefits and drastically reduce her self employment tax. Does that seem like a sane idea? ====>> Self-employer deduct their premiums from gross income on their personal returns i mean on 1040 page 1; however, they cannot reduce their SCh C income by the premiums allocable to their personal coverage and wind up effectively paying self-employment tax on the premiums.
I guess it depends she needs to be a shareholder/ also an employee health insurance for a c corp owner tax deductible ,aslongasthe c corp owner is the only employee;so, for healthcare premium, Employees, yes, and it is not income assuming all employees are treating equally.Shareholders, no. But s/h's who are employees, yes. Owners of a C corp can receive health coverage on a tax-free basis. The corp can fully deduct its premiums. the C corp can deduct any medical expenses or health insurance it pays for the officer/employee as a health insurance deduction item. I mean C corps can deduct 100% of all long-term care insurance premiums paid as a business expense for all employees, their spouses, dependents, and retirees.Furthermore, "the C-corp can also deduct the costs of a medical reimbursement plan. If you have a lot of medical expenses that aren?t covered by insurance, the C corp can establish a plan that results in all of those expenses being tax deductible, and deduct it as a employee benefit expenses. It matters not if there is only a Single Shareholder for a C corp." " In contrast, S corp shareholders must report the benefit as income and then deduct the premiums from gross income on their personal returns?this is merely a wash. In the case of an PTE S corp, as you can see, health insurance premiums paid by an S Corp for more than 2% shareholders must be treated as wages to that owner. So, the only way an S Corp can deduct the amount paid for shareholder health insurance is to include it as part of the shareholder?s wage on W2 I mean; The disadvantage is; net income effect for the corporation is the same, but shareholder-employee?s W-2 wages will increase by the amount of the health insurance premiums paid by the S Corp.however you need to cosnsider: Corps enjoy many advantages over SMLLC/ sole proprietorships, but there are also some disadvantages ; you may contact an Enrolled Agent or a CPA doing taxes in your local area for more info in detail.
If the C corp wrote the checks to to the LLC for healthcare and to our daycare for childcare could we consider those "established" by the C corp?====> Like many tax questions, the answer is "It depends." It depends on what kind of legal entity you own.since you are a corp, things get a little trickier. If you are a C Corp, what you are doing is distributing the profits of the corpo on behalf of a shareholder, which will require that you issue a Form 1099-DIV at the end of the year for all such profit distributions. A corp is a separate legal entity. And therefore, it really should not be paying the personal expenses of the shareholders. Should someone take legal action against the corp, and this type of activity is discovered, someone could easily point to these personal payments as proof that this so-called corp is not really a corporation, and you would then lose the benefit of limited liability. This is known as "piercing the corporate veil" and you definitely don't want to go there.
Most people seem to think that Single Person S corp is the way to go citing double taxation of dividends but it seems like S corps have little value for deducting major costs.======>
There many advantages for an S corp when compared to a C corp however, hard to tell which form of entity is proper to you. you may contact an Enrolled Agent or a CPA doing taxes in your local area for more info in detail.