S-Corp Spouse Benefits

[Harmony]

The business is an LLC-single member taxed as an s-corp. The husband is the 100% shareholder and the wife is the valid employee. The business has a health insurance plan with both husband and wife covered separately because to get the insurance they had to be at least a two-person entity. Can benefits for the wife include insurance premiums for both her and her husband as well as HSA contributions by the company? I know these are taxable benefits that then come off the front of the 1040 but the wife is trying to establish reasonable pay and wants to include these benefits as part of her pay.

[dsi]

I don't think so. Wife is also a >2% SH as well. The plan must be in the name of the corporation, and the health insurance premiums must be included in wages. There is another way around this by setting up a sec 105 reimbursement plan.

[Harmony]

Yes, but can she include in her wages the premiums and company HSA contributions for both her and her husband?

[JON]

Her and husband

If it is an S Corp I am assuming husband works and gets a W-2 also. They are both considered to be > than 2% shareholders and both would include the items in their W-2s.

[Harmony]

Husband does work and get a W-2 also. They would like the wife to take both of their medical premiums and HSA contributions on her W-2 because the husband's W-2 is already over the FICA limit, i.e. she would like part of her $15,000 salary to be these premiums.

[veritas]

It's a moot point

The health insurance premiums and HSA contributions are not subject to employment taxes.

[Harmony]

The reason it is important is because the wife needs to be paid a reasonable salary. If both premiums and contributions are part of her salary, she can pay herself less cash.

[Harmony]

Would it be appropriate for the wife to include the husband's insurance premiums and HSA contributions as part of her wages as described in my previous response?

[Gretel]

It appears that they each have health insurance, which should be reported on their W-2's accordingly. Wife's reasonable salary certainly includes her health benefits but can not include husband's since he not covered under her plan.