Just found out an S corp. client established a HRA (Health Reimbursement Account) this year for employees. They allowed the >2% owner to participate in the plan. Employees pay the first $250 of expenses, then the company reimburses the next $750 of expenses.
Researching I see that HRAs generally do not allow a S corporation shareholder to participate. However, I thought I heard at a seminar that you could treat it similar to health insurance or HSA funding where you add the amount the shareholder received to his W-2 as taxable wages. I can't find any direct support for this in my research.
Can we just add this to his W-2? (Of course, by the time client called me the shareholder had already received a payment.) Also, only one of the two shareholders works for the company (divorce situation), so I want to be sure I'm handling this correctly. Thanks!
Researching I see that HRAs generally do not allow a S corporation shareholder to participate. However, I thought I heard at a seminar that you could treat it similar to health insurance or HSA funding where you add the amount the shareholder received to his W-2 as taxable wages. I can't find any direct support for this in my research.
Can we just add this to his W-2? (Of course, by the time client called me the shareholder had already received a payment.) Also, only one of the two shareholders works for the company (divorce situation), so I want to be sure I'm handling this correctly. Thanks!
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