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Why does the amount I entered as medical insurance payments of $10206 for my >2% shareholder employee show up as a deduction item on the deduction summary page?

 
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CathiM
New Member

Why does the amount I entered as medical insurance payments of $10206 for my >2% shareholder employee show up as a deduction item on the deduction summary page?

Medical insurance paid by the company for a >2% s-corp shareholder employee is a deduction for the company.  So it lowers the amount of your K-1 income.  In other words, you don't get the deduction, the company does.  The IRS has a special requirement that medical insurance paid for >2% shareholders gets added to Box 1 of the employee's W-2 (not Box 3 SS and 5 Medicare). It is also noted on Box 14.  On your personal return this will increase you W-2 income BUT you get a Line 29 deduction (self-employed health insurance deduction) for the same amount on your 1040 page 1. The increase in W-2 wages is offset by the Line 29 deduction and it has no affect on your income on your personal return.  This is how the IRS wants it reported, but you do get the benefit of the deduction, just on the company side.  Let me know if you have any questions, it is a confusing issue.

Here is an IRS link to read more about this issue: S Corporation Compensation and Medical Insurance Issues

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CathiM
New Member

Why does the amount I entered as medical insurance payments of $10206 for my >2% shareholder employee show up as a deduction item on the deduction summary page?

Medical insurance paid by the company for a >2% s-corp shareholder employee is a deduction for the company.  So it lowers the amount of your K-1 income.  In other words, you don't get the deduction, the company does.  The IRS has a special requirement that medical insurance paid for >2% shareholders gets added to Box 1 of the employee's W-2 (not Box 3 SS and 5 Medicare). It is also noted on Box 14.  On your personal return this will increase you W-2 income BUT you get a Line 29 deduction (self-employed health insurance deduction) for the same amount on your 1040 page 1. The increase in W-2 wages is offset by the Line 29 deduction and it has no affect on your income on your personal return.  This is how the IRS wants it reported, but you do get the benefit of the deduction, just on the company side.  Let me know if you have any questions, it is a confusing issue.

Here is an IRS link to read more about this issue: S Corporation Compensation and Medical Insurance Issues

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