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2% Shareholder Health Insurance Question

December 13, 2016 • Melissa Meier • Log In to Post Comments

Can someone please confirm that if an S-Corporation has employees other than sole shareholder (fewer than 50) but doesn't offer health insurance to those employees, the shareholders premiums are subject to Federal, State and FICA??  And then does the premium amount get noted somehow in box 14 of the W-2 and can the shareholder take an adjustment to income for SE Health Insurance on their personal return?

It looks like now employers can go back to reimbursing their employees for premiums without having to include those reimbursements in wages, right?  And if they do that, are the shareholders premiums subject o FICA?

THANK YOU!


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I am also very interested in the answer to your question.  I have a client right now that this applies to. 

The greater than 2% shareholder of an SCorp that wants to claim his/her health insurance premium as an adjustment to income must include the premium amount in the taxable wages of the shareholder.  The amount is reported in Box. 1 of the W2 and Box 14.  It is subject to federal and state  income tax withholding, but not subject to FICA.  If the amount is not included in Box 1 of the W2 of the shareholder/employee, then it is not allowed as an adjustment to income on the indivudual's tax return.

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