C-Corp to S-Corp Medical Reimburse

[DLROMERO]

I have a client changing from a C to a S Corp and currently has an Insured Medical Reimbursement Plan for the owners. As of July they will be a S Corp. I need to verify that the medical expenses now paid through the plan will have to be treated as income since they are becoming a S corp.

[DaveinTexas]

Correct.

I have a client changing from a C to a S Corp and currently has an Insured Medical Reimbursement Plan for the owners. As of July they will be a S Corp. I need to verify that the medical expenses now paid through the plan will have to be treated as income since they are becoming a S corp.

The HRA deduction will only be permitted for shareholders who own less than 2% of the S Corp. All other owners will be charged with wage income for their reimbursements. Also, as you may already know, their premiums paid by the company will be treated as wages (subject to only FIT).