Cheri asks the following regarding her S corp

Q: After years of working for an S-corp I am just now learning that a 2% or more shareholder can't take part in pretax deductions? True? We have a Flex, simple Ira, and a POP plan for health, dental, childcare and other Aflac pretax benefits. If such an individual has in fact participated over the years in such plans how do you determine what is the shareholder's worst potential tax/penalty consequences and how do you right this wrong?

A: Some pre-tax deductions are not available to a self-employed individual. A 2% or more shareholder is considered to be self-employed. You can participate in a Simple IRA, though there are some limitations. Medical benefits and other fringe benefits are not allowed to a self-employed individual.

I suggest you meet with your accountant to determine the penalties that might apply and how to avoid them. Feel free to call our office at 866.467.5809 if you would like to consult with one of our professional tax advisors (all of whom are CPA’s).

Warmest regards,

Tom