QuickBooks Payroll Update

[MJG CPA]

My QuickBooks payroll program just downloaded a payroll update and one of the changes was they are now saying (for 2008) that s-corp medical for >2% shareholders is considered taxable wages for IL.

I am not aware of such a change and upon calling IL Dept of Revenue, they were not aware of it either.

IL practitions will want to be aware of this issue.

Does anyone have any information concerning this change or is it an error by Intuit?

[Medlin Software, Dennis]

I am not finding anything in the IL site allowing exclusion of this for IL purposes.

Such amounts are clearly added to federal wages for tax purposes (usually just on the W-2 for employer paid amounts). IL clearly says to "...withhold Illinois Income Tax if you are required to withhold (or have a voluntary agreement to withhold) federal income tax from payments..."

Without further direction I would say:

Employee deduction - reportable and taxable

Employer contribution - reportable on W-2, subject to IL tax.

Not clear if you must keep up with the employer contribution on a per check basis and withhold - for federal you can add it on the W-2 and leave it up to the employee to adjust their withholding or make up any difference.