Wife becomes employee

[oceanlovin'ea]

I have an S corp that has the husband as the only shareholder/employee. They have medical insurance issued in the name of the company. She keeps his books for him but has never actually been paid for it.

They are having to change insurance companies now. This new insurance company wanted a copy of the 4th quarter UCT-6. So I sent it to her. The insurance company said it has to show her as an employee in order for her to be covered under the insurance policy.

So now I have to figure out how to show her as an employee for last year, at least in the 4th quarter. (She will start getting regular paychecks now) Can I just take one of the draws in December, gross it up and call it wages for her. I realize that I would have to amend the 941, 940 and the UCT-6 to include her wages. Is this the best way to go?

Linda F

[Roland Slugg]

Draws???

Can I just take one of the draws in December, gross it up and call it wages for her?

Dear Linda

People don't take "draws" from C or S corporations. Well, maybe they do, but at year-end they need to be reclassified as either loans, salary or dividends. If your corporation/client has unclassified "draws" by the wife, I suppose they can be reclassified as salary.

Does the wife need the health insurance for last quarter? If not, maybe she should just start coverage as of January ... or February.

[oceanlovin'ea]

She needs to be an employee on the 4th quarter CUT-6 report.

When a s corp shareholder takes money from the company, I have always classified them during the year as draws or distributions.

Linda F