The W-2's were prepared without adding health insurance to wages paid by S Corp to more than 2% owner. Although not according to Hoyle, what would be the tax implications of not deducting the insurance on the 1120S return? Wouldn't the overall result be the same...? As I understand it, the health insurance added to the W-2 wouldn't be taxable for FICA.
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Now I see other good discussions on this topic
Sorry. There are several recent discussions on this point.
With only one shareholder, I believe I'll simply treat it as a distribution and deduct it on page 1 of the 1040. One user commented that it is easy to amend a W-2, and I agree, but it's not something I want to do at this time of year, especially not with this taxpayer, who requires many, many explanations for things he will never understand. -
Hey, Pen,
That guy was my former client. I wondered where he went!Originally posted by PenelopeComment
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deduct on 1040?
If the Health Insurance premiums were not added to the W-2, I would not take them as a deduction on the front of the 1040. That would be the same income tax effect as if they were included in box 1 of the W-2 then subtracted on the 1040.Originally posted by Penelope
Granted, the correct route would be to correct the W-2.
BillComment
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Don't you mean you WOULD take the deduction on the 1040? The distribution is not deductible to the corporation and was therefore included in the taxable pass-through income to the shareholder - just as if it was included on his W-2.Originally posted by Bill TubbsComment
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On the K-1
You could always put it on the K-1 under other deductions.I would put a favorite quote in here, but it would get me banned from the board.Comment
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I would deduct as officer's compensation on the 1120S. I would include as wages on the 1040. I would deduct as an adjustment. I would do the corrected w2 after tax time. It's really not a big deal. The W2C must take about a whole minute to do.Comment
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Scorp SE health Ins
Health ins premium for a 2% s'holder is not deductible by the s-corp, we all know that. We are suppossed to add it to W2 box 1 wages, but it is not taxable for fica, so we leave it out of box 3 sswages and box 5 mcwages.
lets say that the amount is $2400 for the year.
Doing it this way, the correct way, causes the s-corp net profit to be 2400 less, the s'holder's has an extra 2400 of income on his W2 box 1 so that the net result at this point is none, ie. with no health ins premium at all the overall tax result is the same with repect to the 1040 tax return.
then of course we deduct it down below on his 1040 as an adj to income for a SE health ins ins.
so the net result of all of that is he gets to deduct on his 1040, the health ins that his s-corp paid...agreed?
So then, would not the same tax result be gained, in most instances, if you simply classified the s-corps payment of the health ins as an s-corp shareholder distribution?
this is non deductible by the s-corp, and thus 1040 income is not affected, same as doing it "the correct way"
then he deducts it on 1040 as SE health ins...result is the same.
It is as if he....took an s-corp s'draw...deposited the $ in his personal bank account...and then wrote a check for the health ins premium.....Same result near as I can see.
Am I wrong?Comment
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Why not deduct mortgage interest as a charitable contribution? We don't do that because it is the wrong place on the return even though the net result is probably the same. I am simply saying that shareholder health insurance has specific rules and it is easy to comply so why not do it correctly?Comment
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Because
the IRS matches salaries paid on K-1's with wages on the W-2's.Originally posted by veritasComment
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Huh???
Salaries paid are not reported on the K-1.Originally posted by UnregisteredI would put a favorite quote in here, but it would get me banned from the board.Comment
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