HSA for Sole Proprietor or Partners

[yorkriver1]

Need help with explaining tax benefits of HSA. I get that the contributions are on front page of tax return, offset income. A simple article or video for individuals who will be using itemized business deductions, and should be able to offset health insurance premiums against earned income would be helpful.
One of my prospects is a small business partnership, where two brothers appear to be operating it, but one of them is married and the spouse is the legal partner.
They have 3 employees, but won't be doing group insurance, as the employees are lower income and not stable. Exchanges will be an option for employees in 2014, hello subsidy.
Employees could interfere with tax deduction of premiums, maybe, it's complicated, or so it seems.
I need to be able to point to IRS deductions without getting involved in "tax advice".
I am getting back into under 65, as referrals are coming, have been doing more over 65 last few years.
I did see a post here that there is a source for free HSA accounts, what a great thing!

 

[timsip]

Need help with explaining tax benefits of HSA. I get that the contributions are on front page of tax return, offset income. A simple article or video for individuals who will be using itemized business deductions, and should be able to offset health insurance premiums against earned income would be helpful.
One of my prospects is a small business partnership, where two brothers appear to be operating it, but one of them is married and the spouse is the legal partner.
They have 3 employees, but won't be doing group insurance, as the employees are lower income and not stable. Exchanges will be an option for employees in 2014, hello subsidy.
Employees could interfere with tax deduction of premiums, maybe, it's complicated, or so it seems.
I need to be able to point to IRS deductions without getting involved in "tax advice".
I am getting back into under 65, as referrals are coming, have been doing more over 65 last few years.
I did see a post here that there is a source for free HSA accounts, what a great thing!

Going any further than a general statement that HSAs provide tax benefits is grounds you really should stay away from. If they are business owners, they have tax advisers, that is where they should seek clarification of the tax code as it relates to an HSA. It may seem petty at this point to defer to tax experts about a product we are experts about, but HSAs and other similar products are not health insurance, but financial tools. Be an expert in the related health plan, guide your client to their tax expert for the financial tool. In the end of the day, your client will be better educated and you will be protected. I have never had someone not do business with me just because I was honest with them and told them that I was not qualified to answer specific tax questions and advised them to speak with their CPA. It shows professionalism in my opinion and gives you more credibility.

 

[hunting101]

AMEN.............You dont need potential E & O claim

 

[Yagents]

Or, you can point them to my HSA educational website (HSAconsumer.com) below in my signature, which gives generalized advice. And use the form here on my other website to give a visual http://replacecobra.com/HSA-Two-Component-Diagram-2013.pdf

Yes, the deductions would occur on the 1040 tax form and are personal contributions, not business contributions. Tax deductibililty of premiums is whole separate issue.

 

[deadhead]

Suggest they set up an HRA

 

[Ann H]

Suggest they set up an HRA

The original poster said it's a small business with 2 partners. Those 2 partners would not be eligible to participate in an HRA. The IRS has stated that 2 percent shareholders of an S-Corp, sole proprietors, and partners in a partnership are treated as self-employed and are not eligible for the tax-free benefits of an HRA.

 

[AllGold]

And use the form here on my other website to give a visual http://replacecobra.com/HSA-Two-Component-Diagram-2013.pdf

That's a nice piece, thanks (and thanks for the link to your other site as well).

Just a small suggestion/opinion: I don't think I would make a blanket statement saying an HSA "lowers your premiums".

Yes, HSA plans tend to have lower premiums but these days there's not much of a difference like a few years ago. Also, it could be confused as sounding like there's a direct relationship between HSA contributions and decreased premiums.

 

[Yagents]

That's a nice piece, thanks (and thanks for the link to your other site as well).

Just a small suggestion/opinion: I don't think I would make a blanket statement saying an HSA "lowers your premiums".

Yes, HSA plans tend to have lower premiums but these days there's not much of a difference like a few years ago. Also, it could be confused as sounding like there's a direct relationship between HSA contributions and decreased premiums.

Thanks for your feedback. I agree somewhat with your comments. But if you compare an HSA OOP to a similar Copay plan with the same OOP, the premium is lower when your comparing these two plans at the same company.

For example, compare Goldenrule's 5000 HSA 100% to their Copay 5000 with 100% coinsurance. HSA price should be lower. At least in AZ and FL zip codes.

 

[AllGold]

But if you compare an HSA OOP to a similar Copay plan with the same OOP, the premium is lower when your comparing these two plans at the same company.

For example, compare Goldenrule's 5000 HSA 100% to their Copay 5000 with 100% coinsurance. HSA price should be lower. At least in AZ and FL zip codes.

Definitely. Unfortunately, not as big of a difference as it used to be.

Also, while the difference in the OOP and total risk are crystal clear to me, I sometimes have a hard time making clients see it--or least getting past the "but I don't have a copay?!" block. Of course, that could just be that I suck as an agent.