Can an LLC (Partnership without employees) deduct up to $5000 childcare expenses as a fringe benefit for partners? Would I need to set-up spouse as an employee?

Forum|Forum|7 years ago
June 1, 2019
2 replies
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Turbo Tax Business seems to only allow to add fringe benefits in employee section.

TurboTax Business Windows

Best answer by SweetieJean

Partners are eligible for the Code Sec. 129 dependent care assistance exclusion. The exclusion is for amounts provided under a written plan of the employer and is limited annually to $5,000 ($2,500 for a married person filing separately). However, for a plan to qualify as a dependent care assistance program, no more than 25% of the amount paid or incurred by the employer for dependent care assistance during the year may be provided for the class of individuals who are shareholders or owners and their spouses or dependents, each of whom (on any day of the year) owns more than 5% of the stock or of the capital or profit interest in the employer.

S

SweetieJeanAnswer

Employee

Partners are eligible for the Code Sec. 129 dependent care assistance exclusion. The exclusion is for amounts provided under a written plan of the employer and is limited annually to $5,000 ($2,500 for a married person filing separately). However, for a plan to qualify as a dependent care assistance program, no more than 25% of the amount paid or incurred by the employer for dependent care assistance during the year may be provided for the class of individuals who are shareholders or owners and their spouses or dependents, each of whom (on any day of the year) owns more than 5% of the stock or of the capital or profit interest in the employer.

Carl11_2

Employee

No you can't. Understand also that in a partnership, an owner/partner can not be an employee either. So either they're a partner, or they're an employee. But they can't be both. If this partnership only has two partners and you decide to make one of the two partners an employee, then you no longer have a partnership. The partnership would either have to acquire a new partner, or it would have to be dissolved and closed, and a completely new single-member LLC created, established and registered.

If your state taxes personal income, then this process is double the work.