Facts of case.

1.) my wife has significant out of pocket medical expenses (est $15,000) year. We get no tax benefit from these on SCH A

2.) We are insured through my employer.

3.) she was receiving disability checks, and was unable to work a traditional job until she formed her own business, which will profit $100k ish this year (before paying herself)

4.) she formed an s-corp effective 1/1/23, to save on payroll taxes.

Loophole plan - get tax free medical reimbursements

Step 1.) form a “family management company sole proprietorship” in my wife’s name.

Step 2.) hire me (and my kids) to work for the family management company, W-2 wages

Step 3.) s corp pays family management company for services provided (I provide bookkeeping and our son does some SEO research, graphic design, and social medial work)

Step 4.) family management company offers sec 105 HRA reimbursement plan to me, reimbursing up to $11,000 in out of pocket medical expenses for my family.

Savings,

Fed tax 22% State tax 5.5% Social & Medicare 7.65% SE tax 7.65 %

On $11,000 in reimbursements = $4,700 in tax savings.

Plus whatever tax savings we get for hiring out son.

Tell me why this won’t work