HEALTH insuance 1120-s shareholder

[grandmabee]

I have a 50% shareholder in S-corp where the corporation pays the health insurance premium and I post it as a distrubtion they did not include in the W-2. Am I correct in thinking they can't us it as adjustment on page 1 of 1040. it must be medical. I am having them change for this year and include in W-2 New Client.

Thanks for you opinions

[ann newman]

Do they have other employees? If not, consider having them amend payroll and add the medical insurance to their 2007 payroll. Health insurance is not subject to Fica taxes or fed unemployment - possibly state unemployment check with your state - so the cost of amending may not be that bad. It increases their wages, decreaes their S corp income and allows them to deduct their health ins on page one (family coverage if included). If they have employees they have to cover qualified employees to be exempt from fica and unemployment taxes(non-discrimination tests). I hope this helps. It isn't a very painful amendment but it's hard to fill out a 941-C because none of the taxes change - only gross wages. Ann Newman

[MontanaEA]

Ann,

Are you sure about the nondiscrimination rules on employee health insurance? I was under the impression that they didn't apply as long as the only benefit in question was employee health insurance premiums.