Reporting Health Insurance paid by S-Corp
A 2% (or more) shareholders of S-Corporation, whose health insurance gets paid or reimbursed by the S-Corporation, need to include the total of that health insurance in box 1 and 16 of their Form W-2. IRS have become explicit in not allowing the Individual Self-Employed Health Insurance deduction if the fringe benefit was not reported in their W-2. Along with not allowing the deduction, they will assess penalties to both the taxpayer and tax preparer if the deduction is not handled properly but taken on the Tax Return. This fringe benefit should not be subject to Social Security, Medicare and/or Unemployment Insurance taxes for the employee or employer.It is of utmost importance, that this is done before the end of the year with your payroll provider, otherwise the deduction will not be allowed on the Tax Return.
A 2% (or more) shareholders of S-Corporation, whose health insurance gets paid or reimbursed by the S-Corporation, need to include the total of that health insurance in box 1 and 16 of their Form W-2. IRS have become explicit in not allowing the Individual Self-Employed Health Insurance deduction if the fringe benefit was not reported in their W-2. Along with not allowing the deduction, they will assess penalties to both the taxpayer and tax preparer if the deduction is not handled properly but taken on the Tax Return. This fringe benefit should not be subject to Social Security, Medicare and/or Unemployment Insurance taxes for the employee or employer.It is of utmost importance, that this is done before the end of the year with your payroll provider, otherwise the deduction will not be allowed on the Tax Return.
If we provide your S-Corporation with Payroll Service – please include the amount (if any), in a separate line, on your next Payroll Worksheet. Please do it before 12/15/2014.
Most other third party payroll providers should be aware of these fringe benefits and should be able accomplish the reporting as required.
As always – please call or email me with any questions or concerns.
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