s corp Health Benefits

[S T]

Seems like this was discussed prior,

can an S corp pay 100% of 2% shareholder health insurance premiums and only 50% of other employees health insurance premiums?

I realize that if S Corp pays 100% of 2% shareholder, it is added to wages, but not subject to FICA/Mcare, correct?

Thanks

Sandy

[veritas]

This one is stressing you

Yes the corporation can discriminate with health insurance premiums.

Yes you must include the premiums in 2% wages, not subject to FICA, FUTA, SUTA.

hope this helps

[S T]

Yes I am stressing

Thanks Veritas,

Okay I am clear on the premiums paid by the S corp on behalf of the 2% shareholder. Just add to box 1 wages, not included in box 3 and 5.

Next question.

Question, portion of premiums paid by 2% shareholder through wages are they subject to FICA/MCare?

Sandy

[JG EA]

That is boxes 3 and 5. So, No.

[S T]

that helps with 2008

JG,

Thanks,

Can you take a look at this for 2007 wage reporting and see what you think

2% shareholder, 50% health care paid by 2% shareholder and 50% health care paid by S corp, the payroll shows that pre-tax deduction of 50% of the health benefits was taken , so reduced the Fica/Mcare deduction and gross wages.

Box 1 shows 76,140 (which is 76,140 wages less pre tax health of 8,947 + 8947 S corp Health 50%)

box 3 and 5 (soc sec wages/mcare wages) show 65,212 (76140 shareholder wage less 50% pre tax).

shouldn't gross wages box 1 - be 76,140 + 8947 from S corp (not reduce for 50% health care pre-tax) = 85,087

shouldnt box 3 and 5 (soc sec wages/mcare wages) = 76,140 not include S corp 50% paid

2% shareholder is not allowed to use pre-tax health care, correct. The health care coverage is in the name of the S corp Group provided to all employees.

S corp pays for 50% of health care benefit to 2% shareholder, so that is included in box 1 and not subject to fica/mcare, correct?


If the above is true, then the 941 payments are short the 2% shareholder's deduction for pre tax health care that the 2% shareholder is paying as it reduced shareholder wages.

Sandy

I am thinking they are under reported on the FICA/Mcare for 2007 due to the erroneous pre-tax deduction.

Sandy

[KJ Judd]

Sandy -

I agree with you. I have a situation as well where the shareholder pays 50% & the company pays 50%. (Although they have not tried to set it up as pre-tax for any employees.)

[S T]

well

Well, Now that I have spent countless hours of researching this, I am changing their payroll to indicate the proper treatment ( I hope) , even trying to get the S Corp to pay 100% of the 2% which would be so much easier reporting wise.

What a mess I have trying to recalculate the quarters and underpayment for Fica/Mcare and preparing the proper W-2 forms. 2006 forms are incorrect, but I am not going to deal with those.

Thanks everyone for your responses and support!

We all need that from time to time!

Sandy

[JG EA]

Finally on board.

The update in TTB says:
A more than 2% shareholder-employee qualifies for the self-employed health insurance deduction if:
1) The S corporation makes the premium payments for the accident and health insurance policy covering the 2% shareholder-employee (and his or her spouse or dependents, if applicable) in the current taxable year; or
2) The 2% shareholder-employee makes the premium payments and furnishes proof of premium payment to the S corporation and then the S corporation reimburses the 2% shareholder-employee for the premium payments in the current taxable year.
If the accident and health insurance premiums are not paid or reimbursed by the S corporation and included in the 2% shareholder-employee’s gross income on Form W-2, it does not qualify for the self-employed health insurance deduction.

So in my simple minded way it is like Sch C. And the whole net income has to be on Sch C (S-Corp in wages) in order to take the deduction on page 1.

I must admit the pre-tax thing threw me, but it doesn't seem to apply in this case. So, doesn't the whole wages plus all the health insurance go in box 1 and just the wages go in box 3 and 5. So box 1 94034 if the shareholder was reimbursed or 85087 if not Box 3 and 5 76140. I don't see a 65212 anywhere.