Hsa

[Lion]

Sorry, but I'm at a client's without research materials. S-corp. Company pays HDHP premiums. And, company funds HSA, too? Then both go on shareholder/employee's W-2. Does shareholder/employee then deduct on his 1040? Where?

Brain is fried and can't answer this from memory. Thanx.

[Gretel]

Goes on page 1 of 1040 on two separate lines.

[Lion]

Thank you, Gretel. And, I was OK up to that point? Company can pay premiums and company can fund HSA?

[Gretel]

Well, some more information is needed. If there are other employees, health insurance also needs to be offered to them. Adding to W-2 is correct for both, insurance and HSA. The question is to which boxes? Insurance depends on other employees, HSA I honestly don't know if just added to box 1.

[Gretel]

Just googled and HSA contributions by corporation are exempt from SS taxes, same as health insurance.

[Lion]

Owner and his wife are both shareholder employees. One part-time admin, so I'm thinking she doesn't qualify for benefits. Two employees who have waived health insurance as they get better plans via their wives who work for larger companies. A new IC plus another new IC who may become an employee if he works out. So he holds out insurance as a benefit, but no takers so far.

They are working with insurance agents and may change to a HDHP to cut their premiums in half. So, they would want the company to fund the family HSA.

Up through 2012, their premiums are added to his W-2 by Paychex, and he deducts on line 29, S-corp acting like a partnership for health insurance purposes. (I prep the s-corp but not his personal return.) If they go to a HDHP with an HSA, then the company can fund the HSA? Reading Pub 15 and line by line instructions for 1040 and 8889, it sounds like the HSA will be a distribution to the shareholder/employee (can be guaranteed payment to a partner). Then does he deduct it as if he made the contribution directly? Put it on line 25 as if he were SE?

I don't get involved with their personal return, but I was on their site today as they were talking with an insurance agent, so of course they asked me lots of questions!

[Lion]

Thanx, Gretel. I should've done that instead of trying to navigate the IRS site!

[Lion]

Now that I'm back in my office, I opened TTB. 13-26 After talking about reporting medical benefits, it states that "These same rules apply to HSA contributions contributed by the S corporation for the more than 2% shareholder (IRS Notice 2005-8). Going to look up that Notice now.

[Lion]

Thanx, Gretel. I think I have this one figured out now. Probably not well enough to be able to explain it to my clients, but getting there!