My single person S Corp reimbursed me for the cost of my health insurance premiums. I have included the value in my W2 earnings. Where do i record the expense in my 1120S

[alex14]

My single person S Corp reimbursed me for the cost of my health insurance premiums. I have included the value in my W2 earnings. Where do i record the expense in my 1120S? Do i just add a line in "All other expenses" in the step by step interface of TurboTax for business 2018?

[alex14]

Thanks. This makes sense. The only problem is i have already filed the W2 and W3. I really only need to change box 1 to reflect the health care insurance reimbursement (the withholding  numbers are fine and accurate). I see that there are W2c and W3c forms i can file. Is this the right approach? Will it raise red flags with the IRS? Thanks!

[DanielV01]

That is the purpose of the W2c and W3c, to adjust an amount that is erroneously reported on the original documents.  As far as it raising red flags is concerned, the risk is low.  The IRS can audit anything, but this is not an item that is likely to create significant concern from them.

[DanielV01 · Accepted solution]

Enter in the category of Officer's Wages.  This technique is an excellent tax-saving technique, but you do need to be careful not to double-report the deduction.  Since you have included the premiums as part of your wages/salary (which will get deducted on your personal return),  you do not take a second deduction against the premiums paid. 

If you also made 401(k) pre-salary contributions as an employee, you include these as officer wages as well.  To illustrate:  Your salary is 50,000, your 401(k) is 5,000 (reducing taxable salary to 45,000), and your health insurance premiums are 5,000 (raises taxable income but not SS/Medicare taxable amount).  You are reporting Officer Wages of 55,000, even though your W2 will look like this:

Box 1 (Wages + Premiums included in Wages-401(k) pre-tax contributon):  50,000

Box 3 (Wages only, 401(k) does not deduct from SS taxation):  50,000

Box 5 (Wages only, 401(k) does not deduct from Medicare taxation):  50,000

It does matter that you report your wages this way, because, an S-Corp must pay it's officers reasonable compensation.  By including the 401(k) contributions and the health insurance premiums, you can raise the amount of reported salary, which helps fulfill the reasonable compensation requirements.