H & W S Corp SH Health Insurance Premiums

[David]

H & W are the only SHs of their S Corp. S Corp pays SH's and full time employee's health insurance premiums.

H doesn't receive a paycheck from the S Corp since the W is the only one active in the business.

The H & W's health insurance is a family coverage in the name of the H. Can the S Corp pay or reimburse the W for the family coverage health insurance premiums and include those payments on her W-2 even if the policy is in the H's name? Or does the S Corp have to process a paycheck for the H for the amount the S Corp reimbursed/paid for health premiums and include that on his W-2?

Thanks.

[Medlin Software, Dennis]

Soft answer... meant to get you thinking, not as advice, and I did not really think on it too long so I reserve the right to be wrong .

Must be shown as income - Insurance paid directly by the S corp will need to be reported as wages somewhere, H, W, or some combination.

Wether or not it is deductible:

From the IRS site:

"A 2-percent shareholder-employee is eligible for an Adjusted Gross Income (AGI) deduction for amounts paid during the year for medical care premiums if the medical care coverage is established by the S corporation and the shareholder meets the other self-employed medical insurance deduction requirements. If, however, the shareholder or the shareholder’s spouse is eligible to participate in any subsidized health care plan then the shareholder is not entitled to the AGI deduction."

Your message does not give enough information to answer "If, however, the shareholder or the shareholder’s spouse is eligible to participate in any subsidized health care plan then the shareholder is not entitled to the AGI deduction".

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If not deductible, I would not have the corp make direct payment. W's pay should be increased the same amount (some might gross it up to keep net pay the same). If not deductible, there will be some underwithholding if the corp pays directly... Unless the H were to start to get regular pay (reasonable compensation, at least minimum wage at the required minimum frequency for your state) I would not allocate it to the H via a single paycheck or W-2 only.