Self Employed Health Insurance SCorp

[Possi]

Well, the divorce is final and I'm paying my own health insurance. After studying it, and calling the IRS to verify what I thought I learned, here is what is happening.

In order to get the deduction for SEHIns, I must pay the insurance myself and be reimbursed in my paycheck for the expense. That reimbursment is subj to Fed w/h but not FICA.

I do my payroll through BOA even though it is just me (so far) and when I included the premium reimbursment, here is what transpired....

The paycheck reported that the wages (box 1 wages) included the premium, and taxes were withheld properly, but the actual PAYCHECK did NOT include the money for the insurance premium.

I have been on the phone with the bank for over an hour. I am dumbfounded by this. They said it is just for tracking purposes and that the corporation should have paid the premium. That is not what the IRS said. They said I had to pay the premium and that it would be reimbursed in my wages with a notation in box 14... fed w/h; no fica.

How do I get the reimbursment if not in my wages?

HELP! THANKS!
~possi

[DaveO]

I don't use a payroll service so I just pay the insurance directly out of the corporation and add it to wages when I file the payroll forms. Perhaps you just need to cut a sepearte check and code it to wages. Then you take the deduction when you file.

[Possi]

thanks Dave!

Thanks for that... I did not think the Corp was supposed to pay the insurance directly. My bad. I completely understand that now I must write the corp check to myself and code it as wages.
gracias!

[SFBOB]

Possi My Take On Your W/2 Health Insurance

Normal adjustments to a 100% shareholders W/2 when he or she is an employee of an S Corporation prior to year end are the following:
[1] Persoanl use of the automobile, If the auto is under the corporation and 100% of the expenses are paid by the coporation.Example $100.00 per month personal use times 12 months add $1200.00 to Box 1 subject to FICA and withholding.
[2] Health insurance is added to box 1, however not subject to FICA or withholding.The reason it is not subject to withholding is you back it out as an adjustment to your AGI on page 1 of your Form 1040.This reduces your taxable income.
[3] I use pay a roll service and no problem. Just call them early in December so they have time to make the adjustment to your W/2. Hope this helps.Bob

[NotEasy]

[3] I use pay a roll service and no problem. Just call them early in December so they have time to make the adjustment to your W/2. Hope this helps.Bob

Can you just make the adjustment at the end of the year? I thought the health insurance premiums paid by the S-corp has to be reported in the quarterly Form 941 accordingly, like if $500 premium was paid in March, it has to be added to the payroll total in the 1st quarter Form 941.

I hope you are right thought because your method makes the whole process much easier.

[Possi]

in time

Normal adjustments to a 100% shareholders W/2 when he or she is an employee of an S Corporation prior to year end are the following:
[1] Persoanl use of the automobile, If the auto is under the corporation and 100% of the expenses are paid by the coporation.Example $100.00 per month personal use times 12 months add $1200.00 to Box 1 subject to FICA and withholding.
[2] Health insurance is added to box 1, however not subject to FICA or withholding.The reason it is not subject to withholding is you back it out as an adjustment to your AGI on page 1 of your Form 1040.This reduces your taxable income.
[3] I use pay a roll service and no problem. Just call them early in December so they have time to make the adjustment to your W/2. Hope this helps.Bob

I am just doing the first payment for health insurance, thank goodness. I can get it straight right away with no corrections to the w2... the W2 will be correct from the beginning.
I'm just glad this is happening in the off season and I have time to deal with it!

My corp doesn't own my car. I keep mileage records and reimburse business miles. I'm afraid if the corp owns the car, the state of VA will tax my bumper off!

I'm pickin up what you're puttin down... thanks!

[AuditorTurnedGood]

[QUOTE=Possi;86841]My corp doesn't own my car. I keep mileage records and reimburse business miles. I'm afraid if the corp owns the car, the state of VA will tax my bumper off!QUOTE]

Not to mention the increased insurance cost. Just be sure that you and your S-Corp have an accountable plan set up for the mileage reimbursement to be safe.

[Possi]

accountable

[QUOTE=AuditorTurnedGood;86842]

My corp doesn't own my car. I keep mileage records and reimburse business miles. I'm afraid if the corp owns the car, the state of VA will tax my bumper off!QUOTE]

Not to mention the increased insurance cost. Just be sure that you and your S-Corp have an accountable plan set up for the mileage reimbursement to be safe.

I am my only employee. Do I need "a plan" in writing? I actually have my mileage log that I refer to for reimbursments. I mark it off when it's paid monthly.

[AuditorTurnedGood]

Technically yes

there should be an accountable plan established at your next board of director's meeting (which if you're like me, and it sounds as if you are,) you are the shareholder, president, CEO, Chairperson of the Board, and sole employee. I added my wife as a minority shareholder because I was tired of having meetings with myself.

[NotEasy]

there should be an accountable plan established at your next board of director's meeting (which if you're like me, and it sounds as if you are,) you are the shareholder, president, CEO, Chairperson of the Board, and sole employee. I added my wife as a minority shareholder because I was tired of having meetings with myself.

And how should it be documented? Is there a standardized form that we can use?

[AuditorTurnedGood]

I've not found a standard form

to use. You could have an attorney draft one. In my case (not saying this is right or would hold up under scrutiny) I simply added the resolution to have one to my annual meeting minutes, stating is would be used for both mileage and the costs associated with my S-Corp's office being in my house. I then drafted an actual plan, simply outlining what the plan will reimburse, at what rate, and the required frequency and form of expense reports.

Like I said, not sure if it will hold water if the Feds come knocking, but merely having one in place in the BOD minutes and perm file, along with actually following its rules of use, would seem to be better than nothing.

[Burke]

I don't use a payroll service so I just pay the insurance directly out of the corporation and add it to wages when I file the payroll forms. Perhaps you just need to cut a sepearte check and code it to wages. Then you take the deduction when you file.

Likewise, my client's S-Corp pays the premium out of the business account, primarily because the plan has to be in the business name. And the in-house secretary/payroll clerk adds it to Box 1 on the final 941 at the end of the year (and the W-2).