CLIENT IN TESTED ME TODAY!!

[WITAXLADY]

Sch C - LLC client came in today - made way too much money!! and he is up to 4 cancer surgeries a year.. and struggling with keeping insurance coverage and high income..

First we talked about an S corp - if so - do we put it into his wife's name so he has no assets as future develops.. could go on disability then.

She works with him as bookkeeper.

Or they inquired about setting up a Foundation.

Donate most of their profits ($300,000) from 2022 this year - to a newly created Foundation, non-profit - pay themselves a salary - under $40,000 total for management and donate the 5% each year.

Would that then bring the Sch C or S corp down to $20,000 income as charitable donation to the foundation and Fopundation non-profit/non-taxable?

Sounds too good to be true??

No issue with being a non-profit - can live on $40,000

For 2023 - Could they then just turn the business into the Foundation and rent the building/shop to the foundation to pay those bills? Continue the business within the Foundation?

Or just quit their business ?

Are a  retail used car dealer and looking at doing wholesale so do not have to deal with rude public.

Thank you!

darlene

 

[kathyc2]

I'm confused on how they are making 300K, can live on 40K, yet can't afford insurance????

 

[Slippery Pencil]

3 hours ago, kathyc2 said:

I'm confused on how they are making 300K, can live on 40K, yet can't afford insurance????

 

The OP said, "struggling with keeping insurance coverage", which could mean all sorts of things not just affordability.

[Slippery Pencil]

I know nothing about charitable foundations, but I'm sure you can't just set up a charity overnight.  It takes months to get a 1023 processed. 

Charitable donations aren't a deduction on Sch C or 1120S.  So no, that would not reduce Sch C or S-Corp income to $20K.

According to https://www.irs.gov/charities-non-profits/private-foundations/excess-business-holdings-of-private-foundation-defined, a charitable foundation can't own more than 20% of a business.

 

[Lee B]

Not enough information, but I would tentatively lean toward an S Corporation.

[WITAXLADY]

Thank you

He has a couple kinds of cancer - surprised he is still alive..

A phenomenal year but worked really hard this year and is willing to pay taxes if need be - but no insurance company will cover him - has been on WI Badgercare but need to have low income for that.

Maybe get by 1 year 2022 as an aberration and then from here on less $$/income as wholesaler

Or just a draw with putting money into a Foundation 1x/1 year  - this year and taking a salary yearly.

I thought it might be too late to do.

Thx D

[kathyc2]

Why can't they get an ACA plan?  Unless over age 65 or coverage available, which doesn't seem to apply, they can buy insurance there.  Of course they wouldn't get premium assistance, but they would have coverage.  Plans may not be the greatest, but they can't be denied due to health problems. 

As pointed out, a charitable donation from a Sch C or S corp would not lower MAGI. 

 

[Lion EA]

If it's his own business, then just stop selling when he's close to the income level you're aiming for. It sounds like he should be closing four times a year for his surgeries and recuperations. Take vacations when he's able; think Bucket List. Wife is bookkeeper, not car salesperson. Does he have salesmen? If so, fire them -- or greatly increase their salaries/commissions.

What about a C corp, salary level that you want/need/consistent with business, hire wife as bookkeeper, C corp can pay medical without putting it on W-2 the way an S corp must?

[samingeorgia]

Would this be a good use for a Donor Advised Fund??

[joanmcq]

Sch C, does wife work for the biz? Then set up medical reimbursement plan for wife & get him covered as spouse. And I agree, ACA plan! No need to do all of this finagling to get income low.