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How To Get Social Security & Medicare Credits ( Self Employment Tax Deductions Explained )

(soft music) – [Toby Mathis] In 2017, we paid my wife’s mother a small amount for administrative
services on a 1099. So we’re not going to discuss whether she’s an employee or a contractor, we’re just going to say okay. My wife and I are the only employees of the company currently, but was wondering if we could get around the self employment tax if we made her mother a
direct part-time employee. The answer is no, you either pay it as, she pays it, so if you 1099’d her, it’s her responsibility
to pay the Social Security and the Medicare. If you paid her as an employee, you’re paying half and she’s paying half, and it’s being withheld. And so if I’m you and I
want to get money to mom, I’m probably going to say can
I rent her house for a meeting, and I’m going to 280A it, which means I’m going to give
her tax free income, that’s it. Or I’m going to have her sit on the board and your next part of
this question comes up where you say hey, I want
to do a health benefit plan, this is what’s called a fringe benefit, then depending on the type of company, it might be taxable or non-taxable, but let’s just assume
that this is a C-corp where you enter into a 105 plan which is a medical reimbursement plan, you’re going to have
to comport with the ACA meaning everybody has insurance or that the company is at
least providing basic coverage, that’s going to be really tough because there’s very few people that provide coverage under group plans. What I’d probably say
is you’re going to go with the faith-based, or they’re going to already
have insurance coverage. [Jeff Webb] So what the ACA says
is that you have to cover, if you have a group plan, you have to cover full-time employees. You do not have to cover
part-time employees. – [Toby Mathis] I don’t know if
you can, I guess you could. – [Jeff Webb] You can cover them,
I did double-check on that, so you can cover them,
you can opt to do it. I think a couple things
are going to happen if you add your mother-in-law to it, I think it’s going to make
your group rates much higher. – [Toby Mathis] Well, here’s the thing, if you don’t have mother-in-law, and it’s just you and a wife, then you don’t have to
worry about the ACA. ’cause you’re exempt.
– Right. – [Toby Mathis] If you bring
mom on as an employee, now you have a little bit on an issue. So I’d be looking at other
ways to get it to mom. – Yeah.
– But now, if she is on, then any benefit you give yourself, you have to give her, unless
she is less than 1000 hours, in which case you don’t have to give it, you’d just treat her like she’s not there, in which case that defeats the purpose, you want to give her something. What you could do though
is if she is an employee, and you don’t even have to
pay her a wage to do this, you give her other fringe benefits like again, a home office, or a cellphone, computers,
things like that. So like there’s ways to
get money to somebody that is not what you necessarily think. And could the health benefits be provided? Yes, it sounds like they could. – [Jeff Webb] They could be. – [Toby Mathis] I don’t know
if there’s a minimum, no you know what, you’re right,
’cause I’ve looked at this. There was an audit where the guy, all he did was work for
his medical benefits, and there wasn’t an hour requirement, he was like five hours
a week or something. So less than 1000 hours, you’re not required to give it to them. Over 1000 hours, I think
you’re into that point where you’re probably
going to be required. I forget the exacts, so
don’t quote me on that, but it’s something around there. (soft music)

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