How To Save $700-$800 Per W2 Employee Annually On FICA Taxes If You Are A Business Owner

In the landscape of employee benefits and tax savings, Section 125 of the U.S. Internal Revenue Code stands out as a powerful tool for both employers and employees. Known as a “cafeteria plan,” Section 125 allows employees to convert taxable cash benefits, like a salary, into non-taxable benefits. Our partner company specializes in helping businesses implement these plans, potentially saving your business $700-$800 per W2 employee (Business must have at least 10 employees) annually at no additional cost to the business.

Pre-Tax Advantages for Employees

Section 125 plans enable employees to contribute a portion of their salary to a plan pre-tax. This means these contributions are exempt from federal income tax, most state income taxes, and FICA taxes (which fund Social Security and Medicare). For employees, this translates into direct savings and a reduction in taxable income.

Employer Benefits: Reduced Payroll Taxes

Employers benefit significantly as well. The employee’s pre-tax contributions lower the total payroll amount, subsequently decreasing the employer’s share of payroll taxes. This not only results in direct savings for the company but also enhances the overall employee benefits package, aiding in employee retention and satisfaction.

Flexible Options for Diverse Needs

These plans can include Premium Only Plans (POPs) and Flexible Spending Accounts (FSAs), offering a variety of choices to cater to diverse employee needs. POPs help in paying insurance premiums pre-tax, while FSAs allow setting aside pre-tax dollars for eligible healthcare and dependent care expenses.

It’s crucial for Section 125 plans to adhere to IRS rules and regulations. This includes offering a choice between at least one taxable and one qualified tax-free benefit and passing…