An S-Corp owner is the sole employee of their corporation. They pay disability insurance personally-it is not paid through a business plan.
IRS has specific rules on deductibility of disability insurance, but I cannot find an example where the policy is paid individually and is used in the business. Even if we run it through payroll as a taxable fringe benefit (as a reimbursement to the owner for business expense paid personally), how would the plan be marked to only distribute non-taxable benefits to the owner?
Another question - if the owner has been paying for their personal disability insurance policy personally, how would the plan differentiate between what was paid personally versus what was run through as a fringe benefit?
It seems we'd need to have the client setup a new plan that runs through the business. Any other thoughts?
Thank you all in advance!