For years, we have included a sole-owner S-Corp's health insurance premiums on Line 1 of his W-2 and deducted them on Form 1040. In 2009, however, his health insurance premiums exceeded his SS (Box 3) wages, and so the excess carried over to Sche A and was subsequently lost in the 7.5% haircut. Now, this same client also has Sche C net income which would exceed the lost deduction amount. On the SEHI worksheet, it skips right over this calculation if it is noted that it is an S Corp. Did we not determine that the plan could be established in the client's name in the case of a sole owner S-Corp? And if this is the case, would the excess amount be somehow deductible by virtue of the Sche C net income?
-
-
You can't split it up between more than one business. Does he have a profit on the S Corp? If so, that counts towards the deduction of the SEHI.In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de Tocqueville -
Are you sure? Can you give me a cite? The worksheet and softare explicitly skips the net profit calculation if it is an S -Corp and only uses SS/MC wages to calculate the eligible deduction. See lines 4 & 11. Excess is carried to Sche A. That is why I wanted to know if he could use his C earnings if the plan were in his name and not the Corp's. (In this case the plan is in the Corp's name, but I was curious if it might apply to someone else.)Last edited by Burke; 06-23-2010, 02:21 PM.Comment
-
Who Paid The Heath Insurance?
Did the S Corp or Schedule C pay the health insurance cost? There is also a required agreement to be a part of the S Corp minutes if paid by the S Corp.The minute books are often never completed and can present a real problem if the corporate veil would be pierced. I have always included a disclaimer letter with my tax preparation invoice;advising the Shareholders to contact their attorney regarding maitenance of their corporation records.We are tax preparers not attorneys"right"?Comment
-
The premiums are paid by the S-Corp. Good point about the minutes and/or a possible resolution in the corp records.Comment
-
I'm relying on Notice 2008-1 that states a 2% shareholder may deduct the premiums that are included in his gross income. If the share of the corp income due the shareholder reported on the K-1 is positive I would consider that included in their gross income and available to be added to the W-2 Box 1 amount. Here is a link you may read it differently.
In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de TocquevilleComment
-
Thanks for the reference. It surely makes it sound like the gross profit would make the more-than-2%-shareholder eligible for the full deduction, until you get to Page 2, where it says "The deduction is not allowed to the extent that the amount of the deduction exceeds the earned income (within the meaning of section 401(c)(2)) derived from the trade or business with respect to which the plan providing the medial care is established. Section 162(l)(2)(A.) Further review of 162(l)(2)(A) says the same thing. Limited to earned income, (which is income subject to FICA under 401). So the software is correct and the excess ded over FICA wages is carried to Sche A and (in this case) lost.Comment
-
S-Corp P&L listing Health Ins exp
The S-Corp has one employee which is also the only shareholder. Therefore the health ins premium that covered the employer/employee/shareholder can only be deducted on the shareholders personal 1040 tax return and NOT a deduction for the S-Corp. Am I reading that correctly?Comment
-
S-Corp Health Insurance
No.Originally posted by AZ-Tax View Post
It is included in Box 1 of the W-2 as gross wages and deducted on the S-Corporation 1120 as wages.
It is included in Box 14 of the W-2 as Health Insurance as an information item only.
Then by reporting the health insurance as wages and reporting as income on the taxpayer's tax return, you net out zero.
Then you deduct the health insurance as a deduction on the taxpayer's tax return.
See page 15 of 1120-S instructions.Jiggers, EAComment
Comment