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Information Reporting for S-Corporation Owners
by Derek Morgan
An important item that is often only mentioned one time a year is the special rule in effect for shareholders who own more than 2% of an S-Corporation. If the S-Corporation pays for the shareholder’s health insurance premiums, IRS rules implemented in 2009 state that the expense cannot be deducted unless the amount paid is included in the shareholder’s box 1 wages. This means, for the average S-Corporation, that if the health insurance premiums paid are not included in box 1 wages for the shareholder’s W-2, the expense is considered non-deductible, thereby increasing income. If it is added to Box 1 wages, the shareholder then is allowed to deduct the expense on the 1040, resulting in the same treatment traditionally enjoyed on these deductions. Please review information reports carefully before they are filed. If you have any questions, or would like help on these issues, please contact our tax professionals at your convenience.
Unfortunately, it is impossible to give comprehensive tax and accounting advice over the internet, no matter how well researched or written. Before relying on any information provided here, contact a tax or accounting professional to discuss your particular situation.