Medicare Payments and the S Corp

[MsTabbyKats]

DH & I own an S corp. It's really his business. He also gets Medicare and every month about $100 from his social security goes directly to cover the Medicare payment.

I know he can add this to his wages and then make an adjustment.......but is this necessary? Or just allowable.

I don't do business returns......my friend the CPA does our company. She wants me to call the payroll woman and let her know how much DH has paid in......but I'd rather not bother if not necessary.

The business is just me and DH and it's really more of a hobby, so he has something to do all day. The income is just a little above expenses.

If necessary I'll. do it ....but I don't want to start challenging my friend or making more entries on our personal return.

Thanks

[Guest Taxed]

Is the S corp paying any part of the shareholders medical insurance? If yes then that is what is included in the W2 income.

Looks like in this example the shareholder is receiving social security, so that income should be reflected on the 1040 and a portion of that may be taxable (go through the worksheet).

[MsTabbyKats]

No, the S corp doesn't pay any health insurance for him or me. I pay out of my pocket for me and take it as an adjustment (schedule c) and his Medicare payment is from his social security.

I think the CPA thinks she's doing me a favor......but she has no knowledge of our real finances, and that this adjustment is not of any value.

[Guest Taxed]

Then I think you are correct. The 1120S does not have to messed with for the medicare benefit he receives. I am assuming you include his ss benefits in your 1040 (to the extent taxable).

[JohnH]

I don't bother with handling my Medicare payments as a SEHI adjustment either, mainly because II don't think it's worth the trouble. And I'm sure it isn't required. So you can just disregard it insofar as the S-Corp is concerned if you wish.

Another point. if you happen to have enough total medical expense to derive a deduction on Schedule A, then you get the benefit of deducting the Medicare premiums anyhow. So in that case the only deduction you gain is a reduction of the 7.5% haircut, which on a $1,200 SEHI adjustment is only $90. The tax savings would be $15 - $23, depending upon your marginal rate. That's not worth doing a lot of paperwork at year-end.