Where do we deduct health insurance premiums, we own a business we file a 1120S and are the owners, on our 1040 and Where? or on the 1120S and Where?

[TaxGuyBill]

Does the corporation pay for the insurance premiums?
Do you submit your insurance expense to the corporation, and have the corporation reimburse you for the insurance premiums?

[Critter]

Did the S-corp pay wages to the shareholders and issue W-2s ?

[kara1]

No w2 it's just me and my husband, the business pays the premiums

[TaxGuyBill]

Did the business have a profit, and did you receive money from the corporation?  If so, you are REQUIRED to put yourselves on payroll, which includes W-2s, quarterly employer forms, Federal Unemployment, and perhaps some State requirements.

Even with no profit or any money received from the corporation, because the corporation paid for the insurance, W-2s MUST be issued for that.  The corporation needs to add the insurance payment to box 1 of your W-2, and then the corporation can deduct it as wages.  If you have OTHER wages from that same corporation, then you might be able to use the Self Employed Health Insurance deduction.

I highly recommend going to a tax professional for your corporate return.  Doing things wrong will easily cost you thousands of dollars.
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[kara1]

What if we paid personally and the company just deposited money in our account  (that happened at the beginning of the year for a few payments) still considered wages?

[Critter]

It isn't the way a check is written it is the payroll reports that need to be filed timely.  Seek out help to get things set up correctly even if you do the forms yourself you will need to be educated on what is required for your state as well as the feds.  A consultation with a payroll company like ADP or Paychex would be wise.

[Critter]

I fully agree ... if you do have an S-corp then seek qualified help to get your books & payroll set up correctly. The alternative is not pretty and very costly. 

The IRS position is that an S-Corporation MUST pay a reasonable compensation to an officer before non-wage distributions may be made. The reason is that they feel that non-wage distributions when no wages are paid is an avoidance of social security taxes. From the IRS website at http://www.irs.gov/businesses/small/article/0,,id=203100,00.html :

"Reasonable Compensation

S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee. The amount of reasonable compensation will never exceed the amount received by the shareholder either directly or indirectly.

Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for the service rendered to the corporation.

Several court cases support the authority of the IRS to reclassify other forms of payments to a shareholder-employee as a wage expense and subject to employment taxes."

The page cites Joly vs. Commissioner, 211 F.3d 1269 (6th Cir., 2000) as one judicial finding on the IRS's authority to reclassify distributions to wages subject to employment taxes. Factors to determine reasonable compensation are given in the ruling.

The AICPA has an interesting article on this topic here: http://www.aicpa.org/publications/taxadviser/2011/august/pages/nitti_aug2011.aspx

You also might want to read a lively discussion on the Tax Almanac website here: http://www.taxalmanac.org/index.php/Discussion_Forum_-_Tax_Questions . The substance of the discussion seems to be that taking a reasonable salary is not optional and, if you took distributions with no salary, the distributions should be changed to salary with appropriate employment tax returns being filed (late, if necessary.)

The fastest way to get audited as an S-Corporation is to not report wages to officers on page 1 of the return.