Are S-Corp Health Ins Prems Subj to FICA?

[lowergm]

Someone please tell me where in the code or other documentation to find where it states that while health premiums paid by the s-corp for a more than 2% shareholder is to be included in income in box one of the W--2, it is not subject to Social Security and Medicare.

Our office is having a debate. We all agree that for the s-corp to take the expense for the over 2% s/h it needs to be included in their W-2 income. The question is whether or not the health insurance premiums are subject to FICA. Please give me the code section.

Thanks
RML

[Bird Legs]

2% S Corp. stockholder-medical ins. Prem.

No they are not subject to FICA tax.
Go to Google and type in: 2% S Corp. stockholder medical insurance prem.
Then go search.

[solomon]

See

Publication 15 Page 10. Bird Legs is correct.

[Richcpaman]

LowerGM:

The reason for this, is to allow unequal distributions for the S/H's in a S-Corp.

They can all get a salary.

They all get thier HI paid, but others may opt for a more expensive plan, have preconditions, etc, that makes thier premiums higher.

If you paid the premiums, and deducted them in the S Corp, you could end up with unequal distributions nad blow up your S status.

So, you add it to the W-2, in box 1, but not box 3 or 5. Fica/Medicare.

Hope this helps!

Rich Graves, CPA

[Luis Mopeo]

Someone please tell me where in the code or other documentation to find where it states that while health premiums paid by the s-corp for a more than 2% shareholder is to be included in income in box one of the W--2, it is not subject to Social Security and Medicare.

IRS Announcement 92-16:

"...If the requirements for the exclusion under section 3121(a)(2)(8) are satisfied, amounts paid by an S corporation for accident and health insurance covering a 2%-shareholder employee are not wages for social security and Medicare tax purposes, even though the amounts must be included in wages for income tax withholding purposes on the 2%-shareholder-employee's Form W-2."