As we get closer to year end, we want to take this opportunity to remind our S Corporation shareholders of some important items to keep in mind.
S Corporation shareholders who own a 2% or greater interest in their corporation must include the following (company-paid) fringe benefits on their Form W-2 as additional wages:
1. Health Insurance - when included on Form W-2, the health insurance is deductible as wages by the corporation. The shareholder receives a self-employed health insurance deduction on page 1 of their personal return equal to the amount included as wages. Failure to include the health insurance on Form W-2 results in NO deduction for the Corporation.
2. Contributions to an HSA - like health insurance, HSA contributions are included on Form W-2 and deductible as wages by the corporation and the individual receives a deduction on page 1 of their personal return.
3. It is important to remember that a 2% or greater shareholder of an S Corporation is NOT eligible for cafeteria plan benefits.
If you are currently using a payroll service, please provide them with your health insurance and HSA information as soon as possible. Please contact us if you have any questions.