2020 Last-Minute Year-End Medical Plan Strategies

All small-business owners with one to 49 employees should have a medical plan in their business. Sure, the tax law does not require you to have a plan, but you should. 1

Most of the tax rules that apply to medical plans are straightforward when you have fewer than 50 employees.

Here are the six opportunities for you to consider:

  1. If you did not obtain a Paycheck Protection Program (PPP) loan, then you should make sure to claim the federal tax credit equal to 100 percent of required emergency sick leave and emergency family leave payments made pursuant to the Families First Coronavirus Response Act (FFCRA). And as long as you are doing that, make sure to obtain the employee retention tax credit too.
  2. If you have a Section 105 plan in place and you have not been reimbursing expenses monthly, do a reimbursement now to get your 2020 deductions, and then put yourself on a monthly reimbursement schedule in 2021.
  3. If you want to but have not implemented your Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), make sure to get that done properly now. You are late, so you could suffer that $50-per-employee penalty should you be found out.
  4. But if you are thinking of the QSEHRA and want to help your employees with more money and flexibility, be sure to consider the Individual Coverage Health Reimbursement Arrangement (ICHRA). It’s got more advantages.
  5. If you operate your business as an S corporation and you want an above-the-line tax deduction for the cost of your health insurance, you need the S corporation to (a) pay for or reimburse you for the health insurance, and (b) put it on your W-2. Make sure that the reimbursement happens before December 31 and that you have the reimbursement set up to show on the W-2.
  6. Claim the tax credit for the group health insurance you give your employees. If you provide your employees with group health insurance, see whether your pay structure and number of employees put you in a position to claim a 50 percent tax credit for some or all of the monies you paid for health insurance in 2020 and possibly in prior years.
  7. We are here to help. Please contact us at Morris + D’Angelo to discuss how to maximize your unique circumstances.

    Parts of this article are published with permission from Bradford Tax Institute, © 2020 Daniel Morris, Morris + D’Angelo


    Steven Geller

    Steven Geller provides and integrates high-level tax planning, international compliance, and consulting solutions. He leads the firm’s practice areas surrounding Estate and Trust, Real Estate including pre/post-development structuring, Tax-Deferred Exchanges, and Multi-Generational Transfers.

    If you would like Steven to speak to you or your Professional Group and bring clarity about the new developments in your Professional arena, please contact us.

    Morris+D’Angelo is the industry leader for many High-Wealth Customers and Organizations.

    Steven Geller, tax planning, compliance, multigenerational family wealth, morris d'angelo1046 West Taylor Street. Suite-200
    San Jose, CA 95126

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    1. Photo: Alan Levine, Caduceus via Flickr.com


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