Are Health insurance premiums and SEP IRA contributions included in W-2's Box 1, 3, and 5 as Taxable Wages for "LLC - Filing as Chapter S" Employees > 2% owners?

[dmertz · Accepted solution]

Health insurance premiums paid by the S corporation for > 2% owners must be included in boxes 1, 3 and 5 of that individual's W-2.

Except for elective deferrals to a SARSEP established before 1997, SEP-IRA contributions are employer contributions, not employee contributions, and appear nowhere on a W-2.  They are deductible on the S corporation's tax return.

[latravers]

That is incorrect.  Health insurance premiums for 2% shareholders should be reported in Box 1 of the W2 only.  NOT in boxes 3 or 5. 

[qbteachmt]

It depends on the payment terms:

However, these additional wages are not subject to Social Security, or Medicare (FICA), or Unemployment (FUTA) taxes if the payments of premiums are made to or on behalf of an employee under a plan or system that makes provision for all or a class of employees (or employees and their dependents). Therefore, the additional compensation is included in the shareholder-employee’s Box 1 (Wages) of Form W-2, Wage and Tax Statement, but is not included in Boxes 3 and 5 of Form W-2.

[MRG-MT]

The only time S Corp >2% shareholder's health insurance is included in Boxes 3 & 5 as compensation is if the S Corp has a group health plan, but covers the shareholder in a discriminatory arrangement. For example, the S Corp covers 50% of the employees' health premiums, but 100% of the shareholder's.