HRA for a spouse that is <2% owner of S Corp
Submitted by Anonymous on Tue, 2009-06-30 17:20.
Linda,
I did search all of the posts for HRA for S Corp.
None of them refer to what happens if a spouse is <2% shareholder and therefore qualifies only as an employee. It was suggested to me by a CPA that setting HRA for <2% shareholder spouse would allow for having medical expenses reimbursed by the corporation without having to add them on W2. We have a situation where I am 98% SH and my husband is paid little salary for his work in the company.
thanks in advance.
Cristina
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Indirect Ownership
Hi Cristina,
Sorry, but I disagree. Pub 15 states the >2% shareholder is someone who directly or indirectly owns more than 2% of the corporations stock.
Your husband owns 2% of the shares directly & 98% indirectly. You own 98% directly & 2% indirectly.
L:)
Thank you for your advice, I
Thank you for your advice, I as afraid that was the case.
Does it mean that in the case of husband and wife it might make more sense to be 50/50? would that make some deductions more allowable; ie. deduction of an expense of a fancy shareholder meeting for a 50% owner feels more deductible then for <2% owner. Any disadvantages for having it structured the way we have it? Should we change to 50/50? or are we for tax purposes already 50/50?
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Thank you!!!
C:)
Husband/Wife S Corp
Hi Crisitna,
You're fine. If you live in a community property state, then you effectively own the corp 50/50 anyway.
No, the split does not affect the ability to deduct expenses for the most part.
L:)
Thank you for your advice, I
Thank you for your advice, I as afraid that was the case.
Does it mean that in the case of husband and wife it might make more sense to be 50/50? would that make some deductions more allowable; ie. deduction of an expense of a fancy shareholder meeting for a 50% owner feels more deductible then for <2% owner. Any disadvantages for having it structured the way we have it? Should we change to 50/50? or are we for tax purposes already 50/50?
Also, could you pls send a link to pub 15 so I could show it to my CPA.
Thank you!!!