LLC taxed as C-Corp: FRINGE BENEFITS not personal income

[Kerry9]

CALIF. Director is Managing-member(majority owner) of LLC (taxed as C-Corp)

If Director is paid 9,600 /yr., Director not required to file (9,750 min.income to file). (9,600 is 99% of Director's income)
LLC gross = 30k. LLC has no other employees.

IRS allows full reimbursement of Director health expenses + "other Fringe benefits" without being taxable as Director's personal income.

Question: What OTHER fringe benefit possibilities exist (under C-Corp selection) which do NOT push income above filing level ? IRS guides do not make this at all clear.


FYI, C-Corp selection has FAR more advantages than disadvantages compared to S-Corp. That selection will remain.

 

[tranquility]

Huh? I think your real problem will be the ordinary and necessary test.

 

[Kerry9]

Huh? I think your real problem will be the ordinary and necessary test.

C-Corps have, as a normal matter of ordinary business (totally unlike S-Corps), 100% deductibility for Director healthcare expenses.
There are others too, but are not enumerated by IRS (as afar as I've been able to look).
Those other ones are what I'm trying to find out.

I don't understand what you mean by my "real problem" ?

 

[tranquility]

The real problem is you are trying to escape taxation for items you intend as compensation. I think you need to sit down with a tax professional to determine the best course. A bald-faced statement that a C-corp has more advantages than an S-corp (or an LLC) is simply untrue. Sure, certain facts may indicate it is better in your case, but, they are not usually so clear.

As to your question about the real problem, you will have to prove what you are doing is within the ordinary and customary way of doing business. It is a two part test and is the basic guideline as to if an expense is deductible. Because of the way you are trying to manipulate things, giving a "fringe benefit" to keep down income and increase value to the principal is going to be a problem on audit.

As to the healthcare expenses, have you reviewed Obamacare taxes yet? I suspect you are giving yourself a gold plated insurance plan. If so, expect a huge tax on such a plan.

 

[Kerry9]

Wow, I'm not sure where to begin:

"Giving myself Gold-plated insurance plan" ?

I've had no health insurance for over a decade...zilch. My proposed "gold-plated" will be a govt.-sponsored one for very low-income persons, supplemented by my own (C-Corp-taxed) LLC contributing co-pays & prescriptions. (As yet, I have nothing - I'm hoping the govt. plan is under 90/mo., as I can't afford more)

Let's see....what other 'escaping taxation' items am I seeking?
Oh Yes ! Fringes such as:
Bus passes, Lunch meals at place of business (provided by employer, me), educational assistance (night classes to gain further professional knowledge), business cell-phone (noncompensatory business expense), and (crossing fingers) one day soon being able to afford a car, with associated deductions.

Amazing you construe above as me "trying to manipulate things".

 

[OHRoadwarrior]

Lets face it, you are the one trying to manipulate tax laws to hide something. What you are attempting to hide is likely SSDI receipt if I had to guess.

 

[tranquility]

Wow, I'm not sure where to begin:

"Giving myself Gold-plated insurance plan" ?

I've had no health insurance for over a decade...zilch. My proposed "gold-plated" will be a govt.-sponsored one for very low-income persons, supplemented by my own (C-Corp-taxed) LLC contributing co-pays & prescriptions. (As yet, I have nothing - I'm hoping the govt. plan is under 90/mo., as I can't afford more)

Let's see....what other 'escaping taxation' items am I seeking?
Oh Yes ! Fringes such as:
Bus passes, Lunch meals at place of business (provided by employer, me), educational assistance (night classes to gain further professional knowledge), business cell-phone (noncompensatory business expense), and (crossing fingers) one day soon being able to afford a car, with associated deductions.

Amazing you construe above as me "trying to manipulate things".

I suspect much of your plan will not pass the ordinary and necessary test. They should also be included as income to you personally. They are examples of what can be, not a list of what are deductible.

See a tax professional. It seems you are misunderstanding some core concepts.

 

[davew128]

C-Corps have, as a normal matter of ordinary business (totally unlike S-Corps), 100% deductibility for Director healthcare expenses.

100% False. S-corps can deduct them as well. The deductibility at the corporate level for fringe benefits for officers doesn't change if you choose C or S.

 

[tranquility]

100% False. S-corps can deduct them as well. The deductibility at the corporate level for fringe benefits for officers doesn't change if you choose C or S.

To be fair, he may have been talking about the exclusion from the employee's income. We must assume the OP owns more than 2% of the corp and would not be an "employee" in an S. (Of course, we will also assume he is a "highly compensated employee" in a C corp under all of the rules so would have problems with his clever plan in any number of areas.)

 

[davew128]

To be fair, he may have been talking about the exclusion from the employee's income. We must assume the OP owns more than 2% of the corp and would not be an "employee" in an S. (Of course, we will also assume he is a "highly compensated employee" in a C corp under all of the rules so would have problems with his clever plan in any number of areas.)

Oh I knew what he meant. My point was to show that he was a) technically wrong with his comments and b) not so clever as he thinks he is.

 

[Kerry9]

100% False. S-corps can deduct them as well. The deductibility at the corporate level for fringe benefits for officers doesn't change if you choose C or S.

Davew128: Your statement is 100% FALSE:

If you educated yourself with IRS pub 15-B, you'd know enough to apologize for such hyperbole & realize you're wrong. There are, in fact, several categories under which S-Corps cannot "deduct them as well" - and it DOES change if you choose C or S.

http://www.irs.gov/publications/p15b/

You would also benefit by brushing up on your reading comprehension skills, before further compounding your own error & hyperbole with statements such as: "a) technically wrong with his comment" being as it was in fact you was was "technically wrong"

 

[Kerry9]

Lets face it, you are the one trying to manipulate tax laws to hide something. What you are attempting to hide is likely SSDI receipt if I had to guess.

You guessed wrong: NO disability income (nor other income). And I'm baffled as to why you accuse me of hiding something, and manipulation.

Many highly-paid IRS staff & counsel spent alot of time drafting & carefully describing the fringe benefit rules in 15-B so that we could avail ourselves of it.


Why do you go about accusing a citizen who takes the time to learn the fruits of their labor and then goes about planning to implement it precisely as written, of "manipulation" ??

 

[tranquility]

Davew128: Your statement is 100% FALSE:

If you educated yourself with IRS pub 15-B, you'd know enough to apologize for such hyperbole & realize you're wrong. There are, in fact, several categories under which S-Corps cannot "deduct them as well" - and it DOES change if you choose C or S.

http://www.irs.gov/publications/p15b/

You would also benefit by brushing up on your reading comprehension skills, before further compounding your own error & hyperbole with statements such as: "a) technically wrong with his comment" being as it was in fact you was was "technically wrong"

Um, both davew128 and I prepare more corporate returns each year than you have probably seen in a lifetime. Take a breath, remove the chip from the shoulder and re-read his statement. Then, go to your publication and see what it describes. Compare and contrast and then get back to us.

 

[davew128]

Davew128: Your statement is 100% FALSE:

If you educated yourself with IRS pub 15-B, you'd know enough to apologize for such hyperbole & realize you're wrong. There are, in fact, several categories under which S-Corps cannot "deduct them as well" - and it DOES change if you choose C or S.

http://www.irs.gov/publications/p15b/

You would also benefit by brushing up on your reading comprehension skills, before further compounding your own error & hyperbole with statements such as: "a) technically wrong with his comment" being as it was in fact you was was "technically wrong"

You know, it would be polite that the next time you call me wrong, you actually be correct. Read Internal Revenue Code Sections 105 and 162 and post back with an apology.