Disability Insurance

[Maria]

Hello,

It is tax season again.

I am preparing a S corporation return. I noticed that the disability insurance premium has always been a M-1 reconciliation item over the years, i.e. it is not deducted on the tax return.
This year I went to visit the client and asked about employee benefits and the client told me that the disability insurance policy covers all employees without any preference. I went back and my co-worker told me that it was set up this way, since, if the premium is not deducted, the proceed is not taxable.

Well, that doesn't convince me. So I really appreciate your input.

Thanks in advance!

[JoshinNC]

Is the employer paying for the benefits of all employees?

If so, the policy premiums are deductible to the corp and any benefits paid are taxable to the employee. It sounds as though this is what you have in place.