A Story to Grow From: The Business Killed by a $27,000 Penalty
Ryan was deep in thought about what he was going to do now that his business was killed by the IRS penalty. Why had he not paid attention to his tax adviser when he told him about the tax law change about the medical reimbursement plan?
Several years before at the suggestion of his adviser he had set up the reimbursement plan. Over the years he had the company reimburse his medical costs, never very much but useful since he never would have enough to get over the limit on schedule A. But last year he had some really large expenses that he had reimbursed. Sure helped hold down his taxable income too.
Then, several months after he had filed his 2015 corporation tax return he received the penalty bill from the IRS. My God $27,000.
Called his adviser about the penalty and was told that he was to have stopped the reimbursements after June 30, but that was about the time all the bills came in. And he was still doing it. That was when he found out that the penalty for continuing to make the reimbursements that the penalty was $100 per day.
It was certainly a business killer for Ryan!