Discussion:Another s-corp health ins question
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Discussion Forum Index --> Tax Questions --> Another s-corp health ins question
| 26 February 2007 | |
| I am encountering a lot of S-corp clients that had a payroll service processing their payroll and not including health ins premiums for shareholders in wages. I am sure that I am not alone. In the past we have excluded the health ins as a line deduction and listed it on the K-1 which went to the front page of the 1040. Any input or advice? | |
| 26 February 2007 | |
| Correct the W-2. You have to tell the p/r service to add it to the W-2. It usually gets added in Dec.
Putting it on the K-1 is WRONG, INCORRECT. You are wrong to add it to the K-1. Correct the W-2,W-3, 4q 941 and any state returns that require it. | |
| February 26, 2007 | |
| Or at this point, just leave it off the corps expenses entirely, book that expenditure to the NP S/H and pick it up on p 1 of the 1040 as usual. | |
| 26 February 2007 | |
| It is put on the K-1 ALL THE TIME. Incorrect? Yep. Incorrect to bleed your client white with a massive battery of PR filing amendments in late February?? Yep. K-1 box 17 code T and get on with it. Tell them they are doing it wrong and to get a better bookkeeper. | |
Michaelstar (talk|edits) said: | 26 February 2007 |
| It is NOT the p/r services error. They are not providing accounting services but p/r processing services. If the accountant does not inform the client how this needs to be correctly handled, how are they to know. This is the error of the accountant and unless these are all new clients of yours that your seeing this problem as the tax preparer, you might want to be a little more agressive and follow up during the year and confirm that items such as this are being correctly handled. Sorry if that sounds hard but at the moment, I can not think of an easier way to cut to the chase. Health insurance premiums of a greater than 2% s/h do not belong on the K-1. | |
| 26 February 2007 | |
| Box 17 just ensures that whoever does the 1040 knows that the reporting was incomplete or non-existent in the worst case. I often find the w-2 reporting short of the actual premiums.
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| 26 February 2007 | |
| Client has "internal bookkeeper" who knows everything and doesn't need the help of an accountant to do the books, only the 1120S. | |
| 26 February 2007 | |
| i have seen the reporting of health ins premiums as line deductions, flow through items and never on a W-2 on many 1120s that I see from other accountants. I just want to report it correctly and not follow the lead of others that are doing it wrong. Thanks for the info! | |
| February 26, 2007 | |
| I like your method Will, have been looking for someplace to enter it, but since I do all but one of my scorp owners' 1040's, just make a note to self so that I don't drop it. Note that even if correctly reported on W2, you still need to note it so that it gets deducted on the 1040. | |
| 26 February 2007 | |
| One of those bookkeepers, sigh. Ok, forget what I said earlier. Make them amend the whole lot of PR returns and be sure to tell the owner that the bookeeper made a HUGE error and that only the amended returns can hope to prevent a bunch of corn-fed enforcement officers from sacking the corporate headquarters. :) | |
Michaelstar (talk|edits) said: | 26 February 2007 |
| It would appear that they DO NEED an accountant to babysit the bookkeeper to make sure the books are being done correctly. | |
| 27 February 2007 | |
| What if the shareholder does not have a W-2? It is all right to put on page 1 of the 1040? or do we issue a W-2 just for the health insurance payment?
Thanks! | |
| 27 February 2007 | |
| Also, when I make an M-1 entry to show it was deducted per books, but not on 1120-S, it puts this adjustment on the shareholder's K-1 automatically. | |
| February 27, 2007 | |
| If shareholder has no earned income from the corp, then it's moot. Not deductible either on the corp or personal. Sorry. | |
| 27 February 2007 | |
| JR1, Tell me what the NP in NP S/H means...
I'm doing one of those now (1120S), but not yet sure if the Health Ins. actually covers the S/H, but I do know it covers an employee. The employee premiums were w/h from his net pay. | |
| 27 February 2007 | |
| I had a client who had a loss, so he didn't take p/r for himself. ( 2% shareholder of s corp).
He did however, pay for se health ins. I issued a W-2 for the amount of the se health ins, no taxes deducted. Several months later the irs asked about it by letter. I answered it and it was accepted by the irs. IT IS ALWAYS WRONG TO PUT SE HEALTH INS ON THE K-1! IF YOU HAVE AN INCORRECT W-2, CORRECT IT! | |
| 27 February 2007 | |
| If I get what JR is saying, leave the health insurance premiums off of the Corp. return entirely, and then report them as SE earnings on the 1040.
Then you can deduct the entire expense as SE Health Insurance. This way, they report the income, and pay some SE tax on the premiums. Seems a bit more reasonable than trying to correct W-2's in Feb. | |
| 27 February 2007 | |
| Does NP Mean Non-Participating?
Anyway, Just remove the Health ins. Ded. from the 1120S, and forget the W-2. M-Kay? | |
| 27 February 2007 | |
| NP means note payable - put a shareholder note payable on the books back to the corporation, just to keep the books straight. | |
| February 28, 2007 | |
| On a W2, it's just included in the wage totals...you can note it in Box 14, but that's a non-math box. | |
| 1 March 2007 | |
| No social security tax and medicare tax on health ins premiums if established under plan - just box 1 ow w-2
never on K-1 | |
| 1 March 2007 | |
| when doing the accounting and corp returns, I always analyze the health
insurance account (or employee benefits) and look whether the shareholders' health was paid by corp. I then reclassify the amount by crediting the expense and debiting the shareholders' loan accounts. I place the info on the K1 as "additional information" so that the preparer of the shareholders' personal returns has the info to take the deduction above the line on 1040. The corp return is correct in that it doesn't take a deduction for the shareholders' benefits. Shareholders must, of course, repay loans either by depositing money in corp or applying distributions... | |
| 1 March 2007 | |
| Dassi,
How does an employee (or S/H) of the C-Corp take an above-the-line deduction for health, I mean after the accounting for it? I thought this deduction was only for self-employes persons. Info is appreciated. Mike | |
| 2 March 2007 | |
| In past years I have always run it either through a S/H receivable account or through S distribs. This past year, however, when it was made such an issue, particulary for single employee S corps, if it is not included in wages but shows up as an expense on the S corp, I have reclassified it to wages even if not included in the W-2, if the payroll returns are all complete. Then on the 1040 I show an amount on line 21 "S corp med ins omitted from W-2" and put the offsetting deduction on line 29. Is this correct? No. Am I going to make the client amend his W-2's. No. Was I negligent not sending a letter to all my clients about it in December? Yes. Am I going to beat myself up about it? No. I'll try to get that letter out this December. | |
| 2 March 2007 | |
| Jdugan - I like your approach. No harm no foul - The end result is the same. I would NOT amend payroll reports , etc. | |
