2007 S Corp Health Insurance

[S T]

S Corp paid only 50% of health insurance premiums for a 20% shareholder which was included on the shareholders W-2 and reflected in box 1 and box 14, the other 50% of the health insurance premiums were deducted from the shareholder's income after tax and also included in box 14.

Question, on the shareholder's form 1040, they deduct the S corp premiums on line 29 on page 1040, AND can they also deduct the portion that they paid after tax on line 29.

Corp policy, not individual policy.

I can't seem to find the answer for the shareholder's portion that they pay through payroll deduction, although I have found confilicting posts, some saying yes they can, some saying that the shareholder's payment has to be reported on Schedule A.

Thanks

Sandy

[veritas]

The portion included in box 1 of th W2

Question, on the shareholder's form 1040, they deduct the S corp premiums on line 29 on page 1040, AND can they also deduct the portion that they paid after tax on line 29.

is an above the line deduction. The other half is a Sch A medical deduction.

[S T]

SE Insurance Deduction for Shareholder

V-

Can you see why I am confused, here is a link to a prior thread

http://www.thetaxbook.com/forums/showthread.php?t=1330&highlight=shareholder+insurance+deduction

It seems that if the S Corp is paying 50% for the greater than 2% shareholder and it is included in wages, that amount can be deducted on line 29 form 1040.

It would also seem that if the greater than 2% shareholder is paying the balance of the 50% insurance premiums after tax, it could also be deducted on line 29 of the form 1040.

All being handled through payroll deductions of the wages from the S Corp for the Shareholder, and the Insurance Policy is under the S Corp.

However, you are saying that the portion that the shareholder pays through payroll deduction has to be reported on Schedule A.

[ChEAr$]

However

is the medical insurance plan established BY the corporation?

And are regular employees also covered?

[S T]

S Corp Health Insurance

Yes the medical plan is in the name of the Corporation.

Yes, the S Corp pays 50% of the employees health insurance premium and the other 50% that employees pay is under 125 plan,

S Corp pays 50% premium payments for shareholder and are added to the shareholders wages on W-2, and the shareholder pays the other 50% after tax from wages (not 125 plan). All numbers are indicated in Box 14.

Sandy

[veritas]

The rule is pretty clear see Notice 2008-1

Health insurance benefits paid for the 2% shareholder must be included in box 1 of Form W-2 as taxable wages.

[S T]

S Corp Health Insurance

S Corp Medical Plan, S Corp health insurance that S Corp pays for shareholder is included in W-2 wages box 1, and indicated in Box 14. S Corps pays all employees medical premiums including shareholder premiums at 50%. Employees are pre-tax and Shareholder is NOT pre-tax.

Shareholder's portion 50% is also included in taxable wages, box 1

What I am asking, is where to deduct what the shareholder pays that is also included on the W-2 in Box 1 , also indicated in Box 14.

Box 14 has S Corp Health Insurance $ = S Corp Health Insurance $ does go on line 29,


and Box 14 has Health $ shareholder out of pocket medical premiums = but what about the portion that the Shareholder had to pay? Line 29 or Schedule A?



Sandy

[BHoffman]

http://www.irs.gov/pub/irs-drop/n-08-01.pdf

This seems to say that the "above the line" deduction is only eligible for premiums that are included in gross income. The info regarding Scorp reimbursement of premiums paid by the shareholder looks interesting.

[veritas]

Sandy

I guess my reference to Notice 2008-1 was too cryptic.

The portion that is included in gross wages is an above the line deduction (50% in this case). The portion that is not included in gross income is a Sch A medical deduction. Box 14 on the W2 is merely informational.

[S T]

Thanks to All

Thanks to all that particpated, I really dislike this S Corp Medical, it should be so easy, but somehow I make it so difficult.

Thanks Veritas,

I think I am now clear on what is what, and guess that we need to look at the S Corp doing reimbursement for shareholder paid portion, or just simply paying 100% for shareholder medical.

Sandy

[outwest]

As good tax advisors..

and having found this problem with the "out of pocket" portion, I'd expect we would suggest to the client that a cut in salary with a equal and compensating payment of the rest of the premium would maximize the tax efficiency.

Personally, clients seem to think I'm smarter when I not only point out problems, but also solutions.

[veritas]

Most clients

don't want to know about problems and expect us to be Harry Potter.

[S T]

Yes planning and Correcting

Outwest, you are absolutely correct, and I am correcting a lot on this client. First they deducted greater than 2% shareholder med premiums as 125 plan, which can not be, so all of the payroll corrections, then they have also overcollected premiums from the greater than 2% shareholder, so that is a mess!

So now how to change over to the S Corp paying all of the greater than 2% shareholder med premiums and including in that Shareholders W-2 Income. Gradually I think we are getting there.

Thanks to everyone for your posts and putting up with me. I am just having a really difficult time with this issue, but alas I think I found the light at the end of the tunnel!

Thank you,

Sandy