Discussion:Health insurance
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Health insurance
| 1 September 2006 | |
| Client has an S-Corp (100% owner) with health insurance in the S-Corp name. S-Corp paid the health insurance however no W-2 was issued to the owner since the owner did not have the cash flow to pay himself. Can I include the health insurance as wages and take the health insurance deduction on the 1040 without a W-2 being issue. Thanks in advance. | |
| 2 September 2006 | |
| A few years ago I issued a 1099 instead of w-2 for health insurance for >2% shareholder. Of course, this is the incorrect way of doing it. At the time I spoke with the IRS and was told that this would be wrong but would be more acceptable than not issuing anything from the S corp. Shareholder would include this as income subject to SE income. This may have changed since then and may cause further scrutiny from IRS. | |
| September 2, 2006 | |
| While it clearly is wrong, frankly, most of the time I'm doing W2's, I don't have the books, and am unable to gross up the W2. While it would mostly affect retirement contributions...I merely don't deduct the med insurance on the corp, and pick it up on the 1040. Income's the same, gross, AGI...but wages is different. So anything depending on that wage # is suspect in that case. | |
| 3 September 2006 | |
| Even if you treat the insurance premiums as wages, the deduction on page one of the Form 1040 is limited to the shareholder’s FICA wages, which in this case is zero since health insurance premiums are generally not treated as FICA wages. See Sec. 162(l)(5)(A). | |
Mtmckeecpa (talk|edits) said: | 3 September 2006 |
| Riley's point is right on. Thanks.
What is interesting to note here is that this same question appeared on another tax message board. None of those responses even addressed IRC 162(I)(5)(A) which definitely limits the the health insurance deduction to the TP's FICA wages. I ran the calculations through ProSeries entering only wages subject to federal withholding and was still allowed the deduction. Just wondering if there is a box to check somewhere that I missed that would limit the health insurance deduction based on 162? | |
| 7 September 2006 | |
| I do not remember reading this code section as it applies to SEHI for S corp shareholder. I've seen so many times, W-2s issued for only the amount of health insurance premiums paid for those shareholders, reported on Line 7 and deducted as SEHI. I wouldn't dispute this FICA wages part, but I read the code section and those cited Sec. 3121 and Sec. 401(c)(1)) and cannot for the life of me see where this fits. I know 3121 deals with SS wages, but could you please be a little more specific so I can find the applicability? | |
| 7 September 2006 | |
| I'm not sure I follow this either. From an intent standpoint I wonder whether the correspondence of S Corp wages to net earnings from self employment is more meaningful. Seems to me determination of the amount may not be dependent on imposition of FICA. | |
| 9 September 2006 | |
| PPC says it so much better than I do: "The deduction cannot exceed the taxpayer's earned income [as defined in IRC Sec. 401(c)(2)] derived from the trade or business that provides the health insurance plan. S corporation shareholders treat their social security wages from the S corporation as earned income for purposes of this limitation [IRC Sec. 162(l)(5)]." | |
Mtmckeecpa (talk|edits) said: | 9 September 2006 |
| My PPC does too. | |
To join in on this discussion, you must first
log in.
