USA 2% S Corp owner health insurance deduction

[CPA1021]

Hello,

My question is in regards to taxes imposed on health insurance premium payments made by an s-corporation for its sole owner. There is one additional employee who does not have health insurance provided by the s-corporation. Are these payment applicable to Social Security and Medicare taxes or is there any eligible exemptions for only two employees?

 

[Drmdcpa]

I generally do not have S corps pay for health insurance for owners even if the company pays for health insurance for other employees. The reason for this is that the owner's premiums have to be added to box one of the W-2 and deducted on the return as wages. Failing to do this eliminates the ability to take the self employed health insurance deduction on the personal return. The premiums are not subject to FICA taxes though. Also if the company is paying for health insurance for owners, but not employees, you have to be concerned if the company is in violation of Obamacare which is another reason I generally would not have such a small company offering health insurance to owners or employees. If you are not required to comply with Obamacare because you are too small (employee roster wise) but you choose to provide health insurance, you are in effect electing to comply with Obamacare. Certain adjustments were made to the administration of the law to avoid small businesses from not offering health insurance, but to me it is not worth the risk.

 

[arkansasaccountant]

If S-corp owners ensure their policy is established through their business, they can deduct any payments made toward the premiums on their Form 1040 when they file taxes.

 

[Drmdcpa]

If S-corp owners ensure their policy is established through their business, they can deduct any payments made toward the premiums on their Form 1040 when they file taxes.

In order to take the deduction on 1040, one needs to follow technical guidelines on the 1120S and W2.