Health Reimbursement Arrangement - Spouse only employee

[daboss42886]

I have a sole proprietorship. I recently hired my wife as my only employee. If I set up a health reimbursement arrangement (section 105) am I allowed to provide my wife's salary entirely as reimbursements for qualified medical expenses for her and her spouse (me)? Or does she have to have a regular W2 salary in addition to the reimbursements?

[PaulaM]

She should be paid a reasonable amount for the work and the work has to be meaningful to the business. So pay her something in addition to the reimbursements.

[daboss42886]

Thanks for the response.

This business is my side gig. I'll probably end up making 20-30K max. The work she is doing for me is meaningful but is reasonably worth about 5-6K, depending on how many hours she ends up working by the end of the year. Her medical expenses this year will probably be close to 8K. Would it then be reasonable in this situation to just give her the 5-6K just as medical reimbursements?

[PaulaM · Accepted solution]

I can't make that determination for you. See the link below for an example of HRA and spousal compensation.

Employee compensation under a Sec. 105 plan