Payroll Issue

[S T]

941x

Thanks JG for posting. I have one that needs to be corrected, so guess I have to decide to do it the old way with the 941C or the new way after 1/09 on the 941X. I can always post the $$ through EFTPS.

Any recommendations? It is to correct S Corp Shareholders Med Premiums and undercollect of FICA/MCare pretax.

Seems like 941X would be easier, but then who knows with the changeover at IRS.

Sandy

[veritas]

There are no

Thanks JG for posting. I have one that needs to be corrected, so guess I have to decide to do it the old way with the 941C or the new way after 1/09 on the 941X. I can always post the $$ through EFTPS.

Any recommendations? It is to correct S Corp Shareholders Med Premiums and undercollect of FICA/MCare pretax.

Seems like 941X would be easier, but then who knows with the changeover at IRS.

Sandy

fica taxes on medical premiums for shareholder-employees.

[S T]

Yes I know

Veritas, Thanks for the reinforcement on that issue.

I have a FICA/Mcare correct because the client entered through payroll for 20% shareholder pretax medical, which they are not allowed. So I have to go through the entire year and recalculate.

After all the posts you assisted me with prior this year and before, I finally have (I HOPE) this client on track with the S Corp Medical for shareholders and the pre-tax for employees. It has been a 2 year MESS!

Sandy

[veritas]

I don't have my resources here

Veritas, Thanks for the reinforcement on that issue.

I have a FICA/Mcare correct because the client entered through payroll for 20% shareholder pretax medical, which they are not allowed. So I have to go through the entire year and recalculate.

After all the posts you assisted me with prior this year and before, I finally have (I HOPE) this client on track with the S Corp Medical for shareholders and the pre-tax for employees. It has been a 2 year MESS!

Sandy

but I don't think the pretax medical expense deferral is subject to FICA tax either. It would definitely be subject to income tax.

[S T]

What happened

Is greater than 2% shareholder was deducting medical expense that the S Corp DIDN'Tpaqy for health care benefits. as pre-tax. And greater than 2% shareholder is not allowed pre tax medical expenses.

So all payroll has to be corrected for that deduction.

The S corp paid medical for shareholder is fine.

I have lived with this nightmare for almost 2 years!

Sandy

[veritas]

I know this is going to sound convoluted.

but a 2% shareholder employee can participate in a cafeteria plan or a health reimbursement arangement.


So in other words I can withhold from my wages and submit funds to an administrator and request reimbusements like anyone else in the plan.

But the money withheld from my wages is not exempt from federal or state income tax. And since a 2% shareholder is NOT an employee for these fringe benefits the amount withheld is not subject to FICA or FUTA.

So you could amend the corporate return and show the amounts withheld as distributions.

Or the other way would be to amend the W2 and include the amounts withheld in box 1 (only) of the W2.

The results will be the same.