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| | Cafeteria Plans |
 | | Also known as Section 125 Plans or "Flexible Spending Accounts," cafeteria plans allow employees to redirect compensation to pay for qualified unreimbursed medical expenses, dependent care expenses, certain insurance premium contributions, and adoption expenses before personal taxes are computed on their paychecks. |
 | | While regulations prohibit a sole proprietor, partner, members of an LLC (in most cases), or individuals owning more than 2% of an S corporation from participating in the cafeteria plan, they may still sponsor a plan and benefit from the savings on payroll taxes attributable to other employees. |
 | | Many cafeteria plans allow employees to pay for up to $5,000 of child and adult dependent care expenses each year with pretax dollars. |
| www.taxguideonline.com /ContentPages/B_EPFB-CafePlan.html (598 words) |
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