↪ LLC has four members; Mr. A 21%, Mrs A 13%, B 33% & C 33%. Filed 2553/8832 and received S Corp. status. A wants to buy out B & C. What are the consequences as regards IRS and the local state authority?
Shareholders B & C will receive their pro rata share of the S corps net income based on the number of days they owned the shares. For instance if the shares were sold on 6/30, B & C would each receive 16.5% of the companies income or losses; the A's would receive 67%. You can avoid this if the sale tax place on 12/31.
In addition, B & C may have a capital gain or loss on the sale of the interest. If the A's purchase B & C's shares for their basis in the S corp, then the gain to report is $0. (B & C would likely be eligible for Sec 1244 treatment of their stock which would allow them to deduct upto $50K of the losses on the sale as ordinary loss ($100K if filing married joint).
Be sure to record the sale in the corporate minutes stock ledger.
↪ Hi, If I am a physician in my S-corp and I hire my wife as a employee doing the books, etc with a wage reasonable for her duties. Can I set up a health insurance under her name as the primary holder and then join the plan as a spouse, thus getting a tax deduction? Is this legal?
If either you or your spouse are receiving medical benefits the value must be included in Box 1 of your W-2 wages.
However, as long as neither of you are receiving insurance benefits from another employer, you can deduct the premiums as self-employed health insurance.
I would just put the policy under your name & have the S corp pay the premiums (or reimburse you). As long as the premium value is included in Box 1, it's deductible.
Yes there are a bunch of hoops to jump through, but it's totally legit.
↪ I was a 1099 independent in 2006. So in 2007 I opened a SEPIRA to put away some $ for retirement. I continued being independent in 2007 and opened an idividual 401k so that I can put the 15500+$.
Now in 2008 I have formed an S-corp. So my questions are..
1. Can I use the existing individual 401k to put away my 401k+bonus (25% of salary) this yr or do I need to open a new acct. Can I combine my SEPIRA acct from 2006 into my individual 401k account(2007)so that I have 1 acount to take care off?
2. In 2008 (S-corp-only employee) I understand I can put away 15500 +25% salary as bonus towards retiremnt. Can I also do a company match on it?
You cannot have an Individual 401(k) and a SEP-IRA at the same time. It sounds like you're no longer contributing the SEP so you should close it. There's no reporting required when you close the SEP.
I would close the existing 401(k) because you'll need to open a new account in the name of your corporation. You can roll the old 401(k) account into an IRA until the new 401(k) is established. Your brokerage firm or bank should be able to help you with that.
You will need to file form 5500-EZ, mark it "final" to close down the 401(k) with the IRS. In other words, some reporting is required to close the 401(k). Check with your brokerage to see if they file this report for you, usually not.
As to combining them into one account, you can. Whether or not you should is more a financial planning question. Basically you're rolling the existing 401(k) into a new one, just like employees that can roll over funds from a previous employer's plan.
On the contributions, there are 2 parts to the contributions for corporations (the calculation for sole-proprietors is a little different):
Salary Reduction - this is limited to $15,500 and is, as the name suggests, deducted from your salary. Note this contribution is subject to payroll taxes.
Profit Sharing - this is the company match and is limited to 25% of your salary. No payroll taxes are paid on this amount.
The two contribution parts combined cannot exceed $46,000 for 2008.