TASC is Instrumental in Court Ruling that Validates Section 105 Plans

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A recent Circuit Court ruling strongly supports the tax savings provided to sole proprietors through Section 105 Medical Reimbursement Plans. Critical to the court’s favorable ruling is close adherence to the procedures prescribed by TASC’S AgriPlanNOW and BizPlanNOW.

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Without TASC we would have been on our own against the IRS and we would never have gotten this far. We would have had to hire an attorney and that would have cost us a lot of money—probably more than we owed.

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TASC, a national leader in employee benefit plans administration, recently helped a Kansas farm couple, Milo and Sharlyn Shellito, who had their Section 105 Plan audited by the Internal Revenue Service (IRS). TASC provided legal assistance for the Shellitos and was able to prove that their adherence to the company’s AgriPlanNOW program had kept them in compliance with all Section 105 Plan regulations. A three-member judicial panel of the Tenth Circuit Court of Appeals unanimously reversed Tax Court decisions that effected the couple’s medical expense deductions.*

This case highlighted potential concerns that self-employed individuals can run into when employing a spouse and affirmed the value of AgriPlanNOW as a legitimate tax-planning device. In handing down the ruling, the Court stated that the Shellitos, “crossed all of the t’s and dotted all of the i’s with respect to the employment relationship.” Their accountant, Geran Kuhlmann, felt that the Shellitos’ strict adherence to TASC’s procedures was crucial. “It was 100 percent important,” said Kuhlmann. “If they hadn’t followed AgriPlanNOW’s instructions so closely, I think they would have lost this case.”

The ruling makes it absolutely clear that if a sole proprietor follows AgriPlanNOW rules and regulations, that the program will be upheld by the courts. In fact, the Court found the IRS’s attempt to challenge AgriPlanNOW, when the rules were clearly followed, both “puzzling” and “surprising.”

This case also demonstrates the importance of choosing a plan administrator with a strong audit guarantee.

“Without TASC we would have been on our own against the IRS and we would never have gotten this far,” says Sharlyn Shellito. “We would have had to hire an attorney and that would have cost us a lot of money—probably more than we owed.”

Tax expert Vern Hoven takes it even further. “The Shellitos did so well in the Court of Appeals because of the instructions, advice and support from TASC. And their legal defense of this audit didn’t cost them a dime!”

AgriPlanNOW (for farmers) and BizPlanNOW (for small business owners) are medical reimbursement plans based on Section 105 of the Internal Revenue Code, Revenue Ruling 71-588 and Letter Ruling 9409006. Available to business owners nationwide these plans are designed to meet the needs of sole proprietors, corporations, limited liability companies and partnerships. The programs can be used to manage expenses for health insurance and uninsured medical, dental, and vision care costs, as well as premiums for dental insurance, long-term care insurance, life and disability income insurance for eligible employees and their families. Plan deductions are available at the federal, state, and social security tax levels and all Plan clients can count on the Plan Audit Guarantee.

*Shellito v. Comm’r, No. 10-9002, 2011 U.S. App. LEXIS 17724 (10th Cir. Aug. 24, 2011)

About TASC
Based in Madison, Wisconsin, TASC’s services include AgriPlanNOW, BizPlanNOW, FlexSystem, PayPath, RetireRite, COBRAToday, and DirectPay. TASC provides over 60,000 sole proprietors, family farmers and small business owners nationwide with innovative, tax-advantaged employee benefit programs.

Bruce Stein, Public Relations & Communications Director

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