Medical Reimbursement Plans are a great tax strategy for most businesses. Flexible Spending Accounts are a form of a Medical Reimbursement Plan. What a MERP does, is it allows a small business to offer some of the same health benefits offered by larger companies.
So what is it? A MERP allows you to reimburse anything that would be considered a medical expense – everything from health insurance to knee replacements – for your employees. You must have an employee. But as the business owner you generally don’t qualify as an employee unless you have a C-corporation. However you can hire your spouse and even your children and they’ll qualify as employees. If it is not feasible or possible to hire your spouse; then why not hire your child? The trick is they do need to actually work in the business and have a reasonable salary. But that salary can be in the form of the Medical Reimbursement. So if your daughter needs braces and you need a new website, hire her to code it for you and “pay” her with the braces.
For more information on MERPS we have a video available to you for at our training website.