topic Is S corp HSA deduction limited by your W-2 box 1,3, or 5 income amount? S corp is showing a loss and the salary is small. in Business & farm

Is S corp HSA deduction limited by your W-2 box 1,3, or 5 income amount? S corp is showing a loss and the salary is small.

simplemark1 — Tue, 04 Jun 2019 00:47:04 GMT

I am the sole employee/owner of an S Corp that shows a $5000 loss for the tax year. The s corp has reimbursed me $2600 for health insurance premiums I've personally paid over the course of the year. I understand amount of health insurance deduction I can take is limited by my earned income in the W-2 box 3 (FICA) and box 5 (medicare) wages. The amount of the health insurance reimbursement is supposed to be exempt from FICA but included in box 1 taxable wages. Therefore, to deduct all $2600 in health insurance, my box 1 wages should have been at least $5200.

My CPA erroneously created my W-2 with $2700 in box 1, $2600 in box 3 and box 5. Can I still deduct $2600 in health insurance premiums on line 29 of my 1040? Is my $4300 HSA contribution (also reimbursed by the s corp) deductible? Is HSA deduction limited to the W-2 box 3 and 5 wages? I can't find any info online about this, and I'm afraid I don't trust the CPAs judgement at this point (I'll be changing going forward...).

Did you receive any regular wages beside the health reimb...

TaxGuyBill — Tue, 04 Jun 2019 00:47:06 GMT

Did you receive any regular wages beside the health reimbursements?

Your W-2 is wrong, so that needs to be corrected. Box 1 needs to be the total of (1) your regular wages, plus (2) your reimbursed medical premiums, plus (3) your reimbursed HSA contributions. Boxes 3 and 5 should only be based on the 'regular' wages.

I'm claiming regular FICA wages (W-2 box 3) of $2600. I...

simplemark1 — Tue, 04 Jun 2019 00:47:07 GMT

I'm claiming regular FICA wages (W-2 box 3) of $2600.
I've already filed...What do you suppose will happen if I leave it as is?  If I don't correct the W-2, what are the consequences?  Will the health insurance deduction on line 29 get kicked out?
Turbotax accepts the 1040 line 29 deduction because it meets the requirement by not exceeding the W-2 box 3 income.

Worst case, I suppose, is that I'll get an additional tax bill for a disallowed deduction.  I'd prefer to avoid the hassle and expense of amended 1040, W-2, 940, 941, and K-1.   Thoughts?

TurboTax can't do it accurately if the W-2 is wrong. The...

TaxGuyBill — Tue, 04 Jun 2019 00:47:09 GMT

TurboTax can't do it accurately if the W-2 is wrong. The W-2 NEEDS to be corrected in order to file a correct tax return.

Although that probably means the corporate tax return, K-1, 940, and 941 are wrong, most likely the final result of all of those is correct, so it MIGHT not be as big of a deal to change those (depending on how exactly they were prepared).

I know I can deduct the HSA contribution on line 25 of th...

simplemark1 — Tue, 04 Jun 2019 00:47:10 GMT

I know I can deduct the HSA contribution on line 25 of the 1040, regardless if the s corp reimburses me or not, but by including it in the W-2 box 1 I can avoid the 15.3% FICA. What are the rules on including HSA contributions in box 1?

Health insurance premiums and HSA contributions go in Box...

TaxGuyBill — Tue, 04 Jun 2019 00:47:12 GMT

Health insurance premiums and HSA contributions go in Box 1. Box 5 or whether or not they are deductible on your personal return does not change that. They would go in Box 1 even if they were not deductible on your personal tax return.

For your personal tax return, no, HSA contributions are not dependent on Box 5 or Earned Income.