Sub-S Health (1120-S)
Year-End is approaching!
Calling all Sub S (1120-S) Owners – rather than wait until your last payroll of the year to scramble for your Sub S Health Insurance with your accountant, you can get us this information NOW!
What is Sub-S Health insurance reporting?
This applies when a greater than 2% shareholder (owner) of an S-Corp has their health insurance premiums paid or reimbursed by the company.
S-corporations can provide health insurance as a tax-free benefit to their non-owner employees and deduct the cost as a business expense, paying no taxes on the insurance premiums. However, shareholders owning outstanding stock greater than 2% must include any health insurance costs paid through the company as income, according to Internal Revenue Code Section 707(c)1, making the amount subject to income tax.
Where is Sub-S Health Reported?
Box 1 (Wages, tips, other compensation): The cost of health insurance premiums paid by the S-Corp for >2% shareholders must be included here as taxable wages for federal income tax purposes.
Box 14 (Other): The same amount is also typically reported again in Box 14 with a label such as “S-Corp Health” or “2% Shareholder Health.” This is an informational entry so the shareholder can properly deduct it on their personal tax return.
Not in Boxes 3 or 5 (Social Security/Medicare wages): These amounts are not subject to FICA taxes (Social Security and Medicare).
How do I know what the number is or if I had it last year?
The total amount for your W-2 is your premium for the 12 calendar months! That is all we need – no need to wait until Dec!
Look at your most recent health insurance bill (typically paid at the beginning of each month) to see what your individual premium (may include your family members) is. If your benefit plan renews mid-year, you’ll need to look to see what your previous premium was as well.
Look at your pay stub ( view example) or W2 (view example) from last year and see if your number is reasonable compared to last year.