1120S (Shareholder's salary & SEP contribution)

[ILLMAS]

I was caught off guard by a fellow accountant, she has a client that is the only employee in a S-corporation, the corporation pays the shareholders/owner health insurance premium, then it's added back into her salary.  The questions was, should the company's SEP contribution be based on the regular salary or should it also include the additional salary that covers the health insurance premium?

Thanks

 

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions

 

[FDNY]

I believe it would be based on box 1 wages, which is the shareholder's compensation, as I read the pub referring to in applying the percentage. 

[Abby Normal]

I use box 1 wages as well, even if it includes health insurance premiums. It's all compensation.

[Randall]

I don't have a reference off hand, but I thought it was limited to Medicare wages.

[Abby Normal]

35 minutes ago, Randall said:

I don't have a reference off hand, but I thought it was limited to Medicare wages.

Sounds like box 1 wages to me:

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-compensation

[Randall]

2 hours ago, Abby Normal said:

Sounds like box 1 wages to me:

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-compensation

I'm probably thinking of the SE health insurance deduction (limited to medicare wages).

[Terry D EA]

Box 1 wages as I read the pub, which, I have also done.