HSA / FSA for LLC filing as S-Corp

[kalamazoo73]

My wife and I are 50% / 50% members of an LLC and will be taxed as an S-Corp starting 1/1/14. We'll draw salaries for our work and take draws from remaining profits.

I understand that LLC's normally cannot qualify for HSA's and FSA's? Does it change things now that we are on the payroll and filing as an S-Corp? (we've always been paid only via draws).

We would love to find a way to cover day care, pretax.

Would converting to a Corporation (S-Corp) be the only way (would that do it)?

 

[Samir]

If the LLC has been treated in the past like a disregarded entity on your personal tax returns, you'll run into some benefits by filing a full out 1065.

I think your s-corp might be able to qualify for an HSA or FSA because it will have its own tax id number, but this is just a guess. I'd read the IRS publications to see if that gives you any real insight.

If you want the daycare covered, you can just pay for it from the LLC as an operational expense. But you have to be careful about this though as this is a slippery slope since it may be taxable since it benefits the employees. I don't know enough about this to advise you properly, but again the IRS publications are pretty good about spelling out the law. Talk to your accountants about what happens with the law in real life.