Discussion:2% S/H pays health insurance himself

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Discussion Forum Index --> Basic Tax Questions --> 2% S/H pays health insurance himself


Discussion Forum Index --> Tax Questions --> 2% S/H pays health insurance himself

Haydengulf (talk|edits) said:

27 May 2014
Is there any advantage to a 2% S/H (S Corp) paying his health insurance himself as opposed to S Corp paying??

Would he still be able to take the above line deduction on his personal return?

Want to thank the staff at Tax Almanac for all your assistance these past years!!! You will be missed very much.

Sandra

Captcook (talk|edits) said:

27 May 2014
Hi Sandra,

Have you considered posting your question over at taxprotalk.com? Most of us are over there now...

There is a good discussion on this already. The conclusion appears that if the s-corp cannot establish a group plan (i.e. it has only one employee), then the corp can pay or reimburse the SH/EE for the premiums and still receive the pg 1 treatment and nontaxability for FICA. If the s-corp has multiple employees, it must have a group plan to qualify for this treatment.

Hope that helps.

Goodday (talk|edits) said:

29 May 2014
I believe there is a requirement that corporation must either pay the premium directly to the insurance company OR reimburse the owner/employee.

Michaelstar (talk|edits) said:

29 May 2014
"Is there any advantage to a 2% S/H (S Corp) paying his health insurance himself as opposed to S Corp paying?"

Not really an advantage of sort but if the 2% s/h has his own policy and wants to maintain that policy for what could be a multitude of reasons - then possibly/probable YES

"Would he still be able to take the above line deduction on his personal return? "

Only if the S-Corp was to reimburse the 2% S/H and also include the 100% of the reimbursement for 100% of the medical insurance premium as taxable wages on this same S-Corp's W-2. If not handled this way, the t/p can only claim this deduction on Schedule A.

Haydengulf (talk|edits) said:

30 May 2014
THANKS ALL!!!

Kendrick (talk|edits) said:

6 June 2014
So if an S Corp shareholder has the corporation pay his HI premiums, he MUST have a group plan and provide insurance to his employees in order to get the front page 1040 deduction? So in audit the IRS would throw out the deduction and send it to Schedule A where there may be no benefit?

Does anyone disagree with this?

Sfbcpa (talk|edits) said:

9 June 2014
I disagree that it must have a group plan and provide insurance to his employees in order to be able to deduct it on page 1 Form 1040. The IRS states in "Notice 2008-1, that if the medical coverage plan is in the name of the 2percent shareholder and not in the name of the S corporation, a medical care plan can be considered to be established by the S corporation if: the S corporation either paid or reimbursed the 2percent shareholder for the premiums and reported the premium payment or reimbursement as wages on the 2percent shareholder’s Form W-2."

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