In order for you to deduct on your individual return the health insurance premiums you paid, they must be reported to you on your W-2 as taxable income or they do not qualify to deduct on your individual return.
The taxpayer received wages from an S corporation in which the taxpayer was a more than 2% shareholder. Health insurance benefits paid for the taxpayer are shown in box 1 and box 14, Form W-2
For more than 2% shareholders, a policy can be either in the name of the S corporation or the shareholder. If the policy is in the shareholder’s name and the shareholder pays the premiums, the S corporation must reimburse the shareholder and report the premium amounts on Form W-2 as wages. (Notice 2008-1)
I agree that it would be better for X to be wages + the premiums for se health insurance. If an s corporation shareholder does not receive reasonable compensation and cash and property distributions are received during the year, then IRS could re-classify the cash and property distributions as wages and generate payroll taxes adjustments for the s corporation.
If TurboTax is generating additional payroll taxes due based on the addition of the se health insurance premiums, then you may need to get a corrected W-2 to use instead, depending on the exact situation.
