If you are a small business owner, we recommend you have a medical plan for your employees. It’s quite straightforward when you have 49 employees or less, and there are several ways a plan can work to a tax-savings advantage.
Below are six things to consider.
- Make sure to claim the federal tax credit equal to 100 percent of required (2020) and voluntary (2021) emergency sick leave and emergency family leave payments. You have most likely made payments that qualify.
- If you have a Section 105 plan and have not been reimbursing expenses monthly, do a reimbursement before the end of the year to get your 2021 deductions. Then, put yourself on a monthly reimbursement schedule in 2022.
- If you want to implement a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), make sure to get that done now. If you’re late, you could suffer that $50-per-employee penalty.
- If you want to help your employees with more money and flexibility, consider the Individual Coverage Health Reimbursement Arrangement (ICHRA), which has more advantages than the QSEHRA.
- If you operate your business as an S corporation, you can get an above-the-line tax deduction for the cost of your health insurance. Ensure the S corporation pays for or reimburses you for the health insurance and puts it on your W-2. Remember, the reimbursement needs to happen prior to December 31.
- Claim the tax credit for the group health insurance that you provide for your staff. See whether your pay structure and number of employees allow you to claim a 50 percent tax credit for your 2021 health insurance payments—there may even be an opportunity to collect credits for prior years, too.
Call me for details at 201.787.6542 or for answers to all of your year-end tax questions.