Another attack by the IRS
From lacerte update
Thus, when the "More than 2% shareholder in S Corporation" box in the wages screen (Screen 10) is checked, the program has historically included box 1 wages in earned income. However, according to code section 162(l)(5)(A), an S Corporation shareholder’s earned income, as defined in section 3121 equals the shareholder-employee’s FICA taxable wages form the S Corporation as shown on the individual’s W-2 for purposes of determining the shareholder’s above-the-line deduction for self-employed health insurance.
We have corresponded with the IRS on this issue, and have been informed that, since FICA wages can be limited to $94,200 in 2006, the more precise amount to use from the W-2 is the S Corporation shareholder’s Medicare wages. Therefore, for CD-5, the shareholder’s Form W-2 box 5 Medicare wages (as opposed to box 1 wages) is included in earned income for the SE health insurance deduction.
From lacerte update
Thus, when the "More than 2% shareholder in S Corporation" box in the wages screen (Screen 10) is checked, the program has historically included box 1 wages in earned income. However, according to code section 162(l)(5)(A), an S Corporation shareholder’s earned income, as defined in section 3121 equals the shareholder-employee’s FICA taxable wages form the S Corporation as shown on the individual’s W-2 for purposes of determining the shareholder’s above-the-line deduction for self-employed health insurance.
We have corresponded with the IRS on this issue, and have been informed that, since FICA wages can be limited to $94,200 in 2006, the more precise amount to use from the W-2 is the S Corporation shareholder’s Medicare wages. Therefore, for CD-5, the shareholder’s Form W-2 box 5 Medicare wages (as opposed to box 1 wages) is included in earned income for the SE health insurance deduction.
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