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Elimination of IRS Penatly for Employer Remibursements for Health Insurance

December 09, 2016 • Nicole Bennett • Log In to Post Comments

Inlight of the passage of the elimination of the penalty on Wednesday December 7th, where are we on the ability to reimburse S-Corp shareholders for their out of pocket medical insurnace and or Medicare premiums for 2016?



The bill should amend the Internal Revenue Code to allow qualified Health Reimbursement Accounts (HRAs) to operate for small businesses without penalty.  The rules should require adherence to certain limits and should retroactively extend the relief provided to small businesses in IRS Notice 2015-17 to any plan year beginning on or before December 31, 2016.  Stay tuned for more information from us on this topic in the next few weeks.

I understand that 2% S corp shareholder medical insurance reimbursements are still governed by IRS Notice 2015-17, Question 2. That is no excise tax ($100 day/employee penalty) and also IRS Notice 2008-1 (include reimbursement in Box 1 of W-2 but not subject to Fica, Medicare, SDI, etc.) still applies, "unless and until further notice". What am I missing?



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