How Does BizPlan Work? An Example

Jim is an owner-operator. His wife Mary provides a valuable service to their trucking business by printing maps, and tracking mileage, service receipts, and other expenses. Jim decides to formally employ Mary and take advantage of BizPlan tax savings. When establishing an employment package for Mary, Jim takes into account the important role she plays in their business. Jim decides to pay Mary a total of $10,000 in employment compensation per year. He pays the compensation as shown in the sample below:

Reimbursement Of

• (A) Family Health Insurance Premiums (Fully deductible to the business, non-taxable to Mary)
• (B) Family Non-Insured Medical Expenses (Deductible and non-taxable)
• W-2 Wages for Mary

Total Compensation

$4,000
+ $3,000
$3,000

$10,000

$7,000 (A + B)
Employee Benefit Expense

x 35% (.35)
Multiply by total of Federal, State, and Self-Employment Tax

= $2,450
Tax Savings

The $7,000 of reimbursed medical costs may now be deducted at 100% as an employee benefit expense. Jim multiplies the $7,000 by a 15% Federal tax, a 5% State tax, and a 15.3% self-employment (FICA) tax. The result: Mary's compensation in benefits and wages has resulted in a $7,000 tax deduction, and actual tax savings of $2,450 this year!!

That's like getting over 10,000 bonus miles a year from BizPlan!

** Ask your tax professional or accountant for more information on how BizPlan would fit your specific tax-rate situation.**