S-corporation shareholder health insurance

[sdtaxman]

Just wondering what you are planning on doing in 2016 with health insurance and a greater than 2% shareholder that receives reimbursement from the corporation? Does it matter if there are other employees and they are not offered health insurance but the shareholder does?

[DaveinTexas]

SEHI for 2%ers

I found this site which explains the new rules fairly well (I am not affiliated with the CPA that created this site): http://www.hbecpa.com/important-w-2-...-corporations/

It seems to me that if the S Corp operates a Group Health Plan and offers coverage to all employees (whether the employees join up or not) then they are in the clear. It is when the owners reimburse their own coverage AND offer reimbursements tax-free to their non-shareholder employees that seems to be against the rules. Really if the group exceeds more than 1 non-shareholder employee, you must have a Group Plan in place to avoid troubles.

Husband and wives (and children) who are also > than 2% shareholders are treated as one person. So, after the transitional relief period (see below) if you have an S Corp that reimburses the > 2%ers AND the employees, the S Corp must add to the employee's wages the amount of the reimbursement. BUT, what is unclear to me (and everyone probably) is does the S Corp add the amount to the > 2%er's Box 1, 3 and 5 of their W2. This was never the case after Notice 2008-1, but is it now...?

Notice 2015-17 offers transitional relief for reimbursements but that expired on June 30, 2015. Anyone know of any other transitional/permanent/proposed relief?

IRS must do something about this; I am sure they are receiving dozens of letters/calls on this issue. Oh, that's right, they don't answer their phones anymore and the mail, well.......

[TaxGuyBill]

BUT, what is unclear to me (and everyone probably) is does the S Corp add the amount to the > 2%er's Box 1, 3 and 5 of their W2.

Just add it to box 1. We still follow 2008-1.


I agree with everything else: It is fine to reimburse the S-corporation shareholder, as long as other employees are not offered it.