January 1, 2010

Q: I have a LLC where I perform the majority of the direct billed consulting work with four or five clients a year. My wife handles the bookkeeping, and may do some direct client work this year. Can we set up a HRA for her, and pay for out of pocket medical expenses (dental, vision, drugs, copayments), plus possibly some of the premiums discussed above?

A: Yes, but keep in mind that LLCs are taxed either as a partnership or as an S-corporation, depending on the election you made when you filed your first tax return for the entity. That determination will affect the details of how the HRA plan is set up and how benefits are reported in the accounting system since there are some differences between partnerships and s-corporations in the area. For most other areas of accounting there is little difference in treatment between the types of entities, so it is possible that this is the first time you need to consider this accounting issue.

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