For Businesses
Section 105 - BizPlan
What is a BizPlan?
BizPlan is a Section 105 Medical Reimbursement Plan. With BizPlan you can deduct 100% of your family health insurance premiums, PLUS all uninsured medical expenses, dental and vision care expenses, employee disability insurance, and term insurance premiums.
The Section 105 of the Internal Revenue Code has been in existance since 1954. Originally, Section 105 plans were used primarily by farmers to provide tax reductions to their family members employed on the farm.
Section 105 of the IRS regulations allows for reimbursement of medical expenses under an employer-sponsored health plan. There are various types of Section 105 plans including: Health Reimbursement Arrangements, Medical Expense Reimbursement Plans, Accident and Health Plans, etc.
In this section we are going to discuss the portion of Section 105 plan as it pertains to an Accident and Health Plan.
The IRS affords for an Accident and Health Plan pursuant to Section 105 of the Tax Code. This type of Plan encompasses Revenue Ruling 71-588, is supported by Letter Ruling 9409006, and meets the compliance regulations of other government agencies including the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA).
The concepts surrounding both the rulings and the code allow for a self-employed individual to employ his/her spouse who is active in the business, and to offer that employed-spouse a medical benefits package. The benefits offered cover the employee, the employee´s spouse, and the employee´s dependents.
In reality, this allows the self-employed individual to deduct 100% of his/her family´s health costs from federal, state, and FICA/Medicare taxes. Standard tax law allows only for healthcare premiums to be deducted at 100% from federal and state taxes, leaving a substantial amount of potential tax savings on the table.
What are the advantages of BizPlan?
- 100% deduction of all health insurance premiums, including long-term care and spouse´s disability policies. Also includes Cancer Insurance for eligible employees and Term Life Insurance premiums (up to $50,000 in coverage).
- 100% deduction of all uninsured medical, dental and vision expenses. (examples of eligible expenses)
- Significant reduction of federal, state, and self-employment taxes.
- Convenient and exclusive Benefits Card .
- An industry exclusive Audit Guarantee.
- Savings Guarantee - receive 100% refund of your enrollment fee if you do not deduct at least $2000.
- Money Back Guarantee
- An optional Payroll Administration feature.
- Complete documentation and compliance with the IRS, DOL, and ERISA.
- Timely mailing of year-end summary statements which are required for tax preparation.
- Support and guidance via our toll-free hotline.
- Contact us to get set up on the Plan. Our friendly staff will walk you through everything!
- Officially hire your spouse as an employee of the business.
- Pay them a reasonable compensation package based on the hours they work.
- Reimburse them for any medical or health-related expenses they, and the other family members, incur.
- Track these expenses throughout the year on BizPlan's user-friendly website.
- Submit your expenses to BizPlan at the end of the year for review and to receive your Year-End Report.
- Take your deserved tax-deduction on your 1040 and reap the rewards!
The most important concept surrounding a Section 105 plan is legitimate employment between spouses or any other named employee. This issue is closely scrutinized by the IRS, and it is absolutely vital that the relationship be in existence. Fabricated relationships are absolutely discouraged. Therefore, the following items must be in place to assure the Plan operates smoothly and the tax advantages are maximized:
- A written employment agreement
- A log of hours worked by the employee
- An established cash (salary) compensation payment amount and schedule.
In addition, it is recommended to:
- Name the insured (it is preferred that the insurance policy be in the employee´s name)
- Maintain separate checking accounts (one for business use and the second for personal use)
- Pay for medical expenses (all medical expenses for the family should be paid by the employee from her/her personal account), and document all payments.
Medical expenses included under this type of Plan are those defined in Section 213 of the Internal Revenue Code. As a general rule, medical care includes amounts paid for diagnosis, cure, mitigation, or treatment of a disease. Appropriate expenses include, but are not limited to:
- Health Insurance Premiums
- Dental Care Fees
- Hospital Bills
- Deductibles
- Vision Care Fees
- Laboratory Fees
- Physician Fees
- Chiropractor Care Fees
- Orthodontia Costs
- Prescription Costs
- Psychiatric Care Fees
- Medical Supplies Costs