2% Shareholder - Health Insurance Premiums - S Corp

[Hoosier]

When a >2% shareholder has health insurance premiums paid the S-corp, my understanding is that to deduct as an expense on the S-corp 1120S, the premiums must be added to the shareholder W2 as wages in Box 1. Then a self-employed health deduction can be claimed on the 1040 for those premiums reported in Box 1 (and Box 14) of the W2. I'm working on an 1120S in which the S corp paid the 100% shareholder health insurance premiums but did not include these premiums as wages in Box 1 of the W2. It looks like by not reporting the premiums on the W2, the corporation cannot deduct as an expense and the shareholders only available deduction on the 1040 would be as a medical expense on Sch A. Am I missing anything? Is there any other way to deduct the premiums on the 1040 other than Sch A?

[Lion]

They were NOT added to the W-2, so NOT income on the 1040. NO income, so NO deduction. Perhaps the S-corp deducted the premiums as health insurance instead of wages. The shareholder did NOT pay them, did NOT pay taxes on them, so does NOT deduct them on his 1040. (That's not the correct way to report/not report, but that's what your client has.)

You can request the S-corp correct the W-2. Then you report the premiums on the W-2 as wages, and you deduct the premiums as an adjustment. (That IS the correct way to report, but will your client have a benefit?)

[My question: Was this written at a time when the adjustment was something less than 100% of the premiums? Otherwise, it seems like a long way around to get to the same bottom line!]

[Rapid Robert]

"[My question: Was this written at a time when the adjustment was something less than 100% of the premiums? Otherwise, it seems like a long way around to get to the same bottom line!]"

I believe the theory is that >2% shareholders are treated just like partners would be for this purpose.