S-Corporation Officer Health Insurance
Why is my CPA instructing me to report to my payroll provider the cost of my health and/or accident insurance premiums?
Medical Insurance Premiums As Wages: The cost of any health, dental, vision, long-term care premiums and often HSA contributions paid by the s-corporation on behalf of a shareholder are deductible, so as long as the company has fulfilled the requirement to report amounts on the officer's W2. The amount is subject to Federal & Colorado income taxes, but exempt from FICA, and FUTA. Therefore it is included in box 1 wages, but not in box 3 or 5. While not required, we typically will include the amount as a memo in box 14 other on the W2 as a courtesy to your preparer. Your account manager may start requesting this from you in early December as "2% shareholder health premiums" as the rule applies to the health & accident premiums shareholder that own 2% more of the stock of a sub-chapter S corporation. If ASAP is not providing you additional accounting services, please compile an accurate sum of all premiums paid for or reimbursed by the corporation on the behalf of the officers and their dependents.
Didn't this change as a result of the Affordable Care Act (ACA)/Obama Care? Yes, in particular if you have other employees that aren't offered coverage. If you employ any other employees besides the officers, it is important to discuss with your tax professional prior to assuming to treat the items as you may have in year's past. If you do employ other employees, your CPA will be asking about the type of health coverage offered and insuring the offer of coverage it is not selectively discriminating against a set of employees that otherwise would be eligible.
Information on this page was partly compiled from these sources:
- IRS.gov - S Corporations
- IRS.gov - S Corporation Employees, Shareholders, and Corporate Officers
- IRS.gov - S Corporation Compensation and Medical Insurance Issues
- IRS.gov - Notice 2005-8
- IRS.gov - Wages and Compensation for S Corporation Officers FS-2008-25
- Colorado.gov Employer Services FAQ, Premiums Question 6
- NOLO.com legal encyclopedia article regarding s-corporations salaries