1

I own an S corp and I am the only employee. I think I would like to create an educational assistance program for the company to pay for my student loans with pre-tax dollars. IRS publication 15-b says that I must create a written plan and it provides a list of criteria to allow myself to use the program.

One of those criteria is "The program doesn't provide more than 5% of its benefits during the year for shareholders or owners (or their spouses or dependents). A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business." Would I break this criteria if I am the only employee and I am receiving this benefit?

https://www.irs.gov/publications/p15b#en_US_2021_publink1000193667

Chapter 11 of https://www.irs.gov/pub/irs-pdf/p970.pdf describes Employer-Provided Educational Assistance and Chapter 4 describes a qualified loan, which I qualify for.

I have attached screenshots to make it easier for you to not have to scour these pages for what I am seeing but I also attached links in case I am missing something.

Thank you for looking at this with me!

Education Assistance Program Pub 15-b

Chapter 11 of IRS Pub 970

Chapter 4 of IRS Pub 970

2
  • You’re the owner and 100% of the benefits would go to you. That certainly sounds as though you are out of luck. Nov 21 at 3:06
  • Unfortunately I think you are correct :( I don't think there is the provision for the single owner / employee to use the benefit
    – Matt
    Nov 21 at 13:56
0

It's clear to me (a non-lawyer) that the intent of most of the program rules are so that the program benefits people with a real financial need.

One of the tests that excludes "highly compensated employees" is the 5% ownership rule (see the green highlights in the link below). I think there is this bad assumption that if you own a large share of the company, then you must not need that financial assistance.

Interestingly, they have a special case for treating "Yourself (if you're a sole proprietor)" as employees (see highlights in yellow).

Highlights from IRS Publication 15-B (2021)

My non-lawyer interpretation + potential tax savings = I'm very close to paying a fringe benefits specialist or tax lawyer to get a clear answer.

I'm in a similar situation - I 100% own a C-Corp and I am the only employee. This assistance would help a lot.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.