HSA in an S Corp.

[Hamacher]

I have a client that is being taxed as an S Corp. and has a HSA setup. How does that get treated?

Thanks in advance for the assistance.

[Kurly]

HSA in S Corp/Pub969

See Pub 969 it may help you

[Hamacher]

Follow Up

I think that they are required to add the HSA distributions (or is it contributions) to his W2, not subjected to SS and Medicare. If that is true, there really isnt a benefit to even having the HSA. Is that correct?

[Burke]

A more-than-2% shareholder in an S-Corp has the HSA contributions added to Box 1 of his W-2, similar to health insurance, and it is shown in Box 12 as well, code W. For a less-than-2% shareholder/employee, the HSA contributions are not included in Box 1. In the first case, the TP gets the deduction on his 1040, line 25.
In the second case, it is a tax-free benefit from the employer. No treatment on the 1040.

[AccTaxMan]

A more-than-2% shareholder in an S-Corp has the HSA contributions added to Box 1 of his W-2, similar to health insurance, and it is shown in Box 12 as well, code W. For a less-than-2% shareholder/employee, the HSA contributions are not included in Box 1. In the first case, the TP gets the deduction on his 1040, line 25.
In the second case, it is a tax-free benefit from the employer. No treatment on the 1040.

Thank you for the explanation.

S-corp has made the $3,000 HSA contribution for a more than 2% shareholder in the 1st Qtr of 2010. However, they were not familiar with the requirement back then, so the conitrbution was not reported in the 1st Qtr Form 941. Can they just add it on the 4th Qtr Form 941 instead of amending the 1st Qtr tax form?

[Burke]

That is what I do. Same thing as the health insurance. Just override the 941 line 1 and W-2. Although, this is the first year one of my S-Corp clients (more than 2% shareholder) has dealt with the HSA thing, and I am having a hard time getting the 8889 completed so that the deduction is allowed on line 25 when Box 12, Code W is input to the system. Anybody else dealt with this?