Health insurance for S-corp SH

[imjulier]

Hey-

Just looking for verification that I am recalling the rules correctly. I have been treating the health insurance of S-corp SH as not subject to Social Security and Medicare withholding. Is this accurate?

Thanks,

Julie

[Guest Taxed]

You are correct.

Health insurance premiums paid on behalf of the greater than two percent S corporation shareholder-employee are deductible and reportable by the S corporation as wages for income tax withholding purposes on the shareholder-employee’s Form W-2.

These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. The additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax Statement, issued to the shareholder-employee, but would not be included in Boxes 3 and 5 of Form W-2.

[Pacun]

I guess TAXED drew faster.

I was asking who the health insurance was for, but Taxed answer the question already.

[Guest Taxed]

I guess TAXED drew faster.

I was asking who the health insurance was for, but Taxed answer the question already.

Next question you go first.

[Pacun]

lol

[Randall]

Remember too that the 1040 p. one deduction is only to the extent of W2 wages subject to Medicare tax (which would exclude the health insurance amount).

[imjulier]

Good morning-

You are all a wealth of information. Thanks for the responses.

Julie

[joelgilb]

bringing this discussion back up for an additional issue.

Any body know how the additional .9% medicare tax withholding works here?

Although the medical ins (wage) is not subject to SS or reg medicare, is it subject to the additional .9% WH?

[TAXMAN]

Shareholder is a 50% owner and retired. S corp pays health insurance and puts on W-2 as wages. No SS or MT wages or withholding. Is tp entitled to tha 1040 pg 1 deduction? Brain dead this AM.

[Mr. Pencil]

Although the medical ins (wage) is not subject to SS or reg medicare, is it subject to the additional .9% WH?

No. See the chart on page 36 of Pub 15.

[joelgilb]

You know, I looked at that chart a dozen times on Saturday and for the life of me kept missing that one section. Thx for pointing me back to it.

And Now that I am fresh and rested I see it!

Now if only I could get my payroll software to correctly calculate it! lol

[NECPA in NEBRASKA]

I have another twist, but I don't know if it matters who the check is paid to. My new client, 100% shareholder in an S corp has to reimburse his ex-wife for his kid's health insurance that is paid by her employer. It is group health taken out of her check. I am sure that it is pre-tax, because it's a large bank.
Is he able to write the check to his ex out of the corporation and add it to his W2? Maybe I am just thinking about it too hard, but with the new changes from the ACA, I don't want to jump the gun. To make things worse, only one of the kids is allowed on his tax return. Thank you to anyone that chimes in.

[Lee B]

I had a very similar situation arise recently.

My client is the 100% owner of an S Corp.

His wife is not an owner and isn't involved in the business.

She has a separate job which provides health insurance for the two of them.

Short Answer: No, the health insurance has to be in the shareholder's name.

[NECPA in NEBRASKA]

Thanks. That was what I told him, but he said his old tax preparer let him. His old tax preparer let him do anything that he wanted and has now passed away so he didn't have to worry about Circ 230. He had all kinds of personal stuff in the corp that I told him is not deductible. He will probably want to find someone new again.

[easytax]

I have another twist, but I don't know if it matters who the check is paid to. My new client, 100% shareholder in an S corp has to reimburse his ex-wife for his kid's health insurance that is paid by her employer. It is group health taken out of her check. I am sure that it is pre-tax, because it's a large bank.

Is he able to write the check to his ex out of the corporation and add it to his W2? Maybe I am just thinking about it too hard, but with the new changes from the ACA, I don't want to jump the gun. To make things worse, only one of the kids is allowed on his tax return. Thank you to anyone that chimes in.

Just some thoughts ----

1/ Is this payable as child support or as alimony --- one is deductible -- one not?

2/ Is he "happy" with ex ---- possibly he might want to know that the "reimbursement" depending on how done would be "income" to her as if health care from a big corp. --- she has already benefited from possibly pre-tax on that amount.

My job is done --- more muddy waters. Have a good season.

[NECPA in NEBRASKA]

Thank you. He says that it is part of his child support.