S-Corporation Shareholder/Employee

[Lion EA]

More than 2% shareholder/employee of an S-Corporation:

1.) Health insurance premiums paid by the S-corp add to employee W-2 wages box 1 only? Deduct as adjustment or on Schedule A?

2.) SIMPLE Plan. Add to W-2, boxes 1,3, & 5? Deduct as an adjustment? What if payroll company did NOT include SIMPLE on W-2? No further action?

[Maribeth]

More than 2% shareholder/employee of an S-Corporation:

1.) Health insurance premiums paid by the S-corp add to employee W-2 wages box 1 only? Deduct as adjustment or on Schedule A?

2.) SIMPLE Plan. Add to W-2, boxes 1,3, & 5? Deduct as an adjustment? What if payroll company did NOT include SIMPLE on W-2? No further action?

1. Health insurance premiums are included in Box 1, subject to federal income tax. They are not subject to ss/mc tax. On my W-2's we put the notation s/h med and the amount in Box 14. If the wages are more than the health insurance premiums, then the total of the health insurance premiums are deducted on Page 1 of the 1040.

2. SIMPLE plan -- just the opposite. Subject to ss/mc tax, NOT subject to federal income tax. The SIMPLE deduction is taken on the 1120S, not on the 1040. If the payroll company did not due the W-2's correctly, then they need to redo the W-2's correctly. And they probably did not do the 941's correctly either. They will need to correct their mistakes.

Maribeth

[Catherine]

More than 2% shareholder/employee of an S-Corporation:

1.) Health insurance premiums paid by the S-corp add to employee W-2 wages box 1 only? Deduct as adjustment or on Schedule A?

2.) SIMPLE Plan. Add to W-2, boxes 1,3, & 5? Deduct as an adjustment? What if payroll company did NOT include SIMPLE on W-2? No further action?

1. Box 1 only. Adjustment goes on Line 29 of 1040; self-employed health insurance deduction.

2. Dunno off-hand; maybe someone else does.

Catherine

[Lion EA]

Thanks guys. I prepared the 1120S, think I handled those situations. I do NOT prepare the payroll nor the owners' (H&W only shareholders, one more employee also on SIMPLE plan not a shareholder) personal returns. But, had a call from owner/client while he was in his preparer's office getting the joint return done. It's been about a month and many not S-corp returns since I prepared this S-corp, so answering questions via telephone from home was difficult in my sleep-deprived state.

I think the health insurance was right, on the S-corp return and as handled by payroll, and so was my advice to them tonight.

The employees wrote checks/the company wrote checks near year end for the SIMPLE, and the payroll company said it was too late to include on W-2s (they did the health insurance, though), so I don't think that was handled right by payroll. I reported the S-corp expenditures on the cash basis, so return reflects what happened but not what should've happened. I guess I need to advise my client to have payroll correct the W-2s, last quarterlies, annual payroll reporting. After tax season.

Why can't the complex ones happen in January before I'm this tired?!