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AK Form 5500-EZ: What You Should Know
I'm going to show you this as a good way for your employer to comply with federal law, and also because I've used it for my own personal company in the past with good success. I want to stress that this isn't an official IRS document and I can't attest to its accuracy or completeness. Let's start with what's required to file the 5500-EZ: If you are self-employed, your plan assets must be used for qualified plans (such as a Solo 401(k) or a Health Savings Account). If your plan uses nonqualified plans, you must include the nonqualified plan assets in your gross income. You also must file Form 1040, Schedule C, Part I, the annual return, showing the nonqualified plan assets. The 5500-EZ has other requirements: Your account must be subject to an investment policy or standard, and all investment assets are at least 3 percent of your fund's net assets. Your plan assets must not consist of any assets that have been deemed a commodity by an SEC reporting agency for tax purposes, including futures, options, or contracts that are similar to or similar to interest-bearing investment contracts. Your account cannot contain any asset, directly or indirectly, that may be held in more than one account. The fund in which you hold the portfolio must be held separately from your regular business account. In general, a medical expense is any qualified medical expense that is incurred during or during the taxable year of receipt of the payment. A qualified medical expense is an expense that you reasonably and regularly incur in your professional practice. Therefore, you can deduct medical expenses only for the qualified expenses, even if you make some payment or use some other asset to make the expense. However, if you pay for a medical expense at a time when your plan fails to meet the requirements of the 5500-EZ, you can deduct the payment, however, since the insurance policy was purchased through an S corporation (or a partnership, trust, or other entity organized and operated exclusively for your benefit) you can deduct the insurance policy interest up to the greatest of (1) 10,000 or the sum of: (2) the amount by which the plan failed to meet the 5500-EZ requirements, and the excess of the plan's cash flow from other assets over the amount by which the plan failed to meet the 5500-EZ requirements.
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