In 2022 S-Corp 1120S, where do I indicate that an amount for medical insurance premiums was paid for by the shareholder and supposed to be deductible to the company. When I enter the amounts in the >2% shareholder officer column the amounts do not flow through to line 18 (employee Benefits) on the 1120S. Only if I enter the amounts in the "ALL Employee" column does the amount flow through. I don't see any box where I indicate the shareholder has paid the premiums. What is the problem?
Health Insurance Purchased in Name of Shareholder
Insurance laws in some states do not allow a corporation to buy group health insurance when the corporation only has one employee. Therefore, if the shareholder was the sole employee of the corporation, then the shareholder has to purchase health insurance in the individual’s own name.
Notice 2008-1 provided rules by which a 2-percent shareholder would be allowed an above-the-line deduction even if the health insurance policy was purchased in the name of the shareholder. Notice 2008-1 provided four examples, including three examples in which the shareholder purchased the health insurance and one in which the S corporation purchased the health insurance.
Notice 2008-1 states that if the shareholder purchased the health insurance in the individual’s own name and paid for it with his own funds, the shareholder would not be allowed an above-the-line deduction. On the other hand, if the corporation obtains and pays for health insurance in its name, covers the shareholder under the policy, and reports the premiums as W-2 wages to the shareholder, then the shareholder is allowed an above-the-line deduction. Similarly, if the shareholder purchased the health insurance in his own name but the S corporation either directly paid for the health insurance or reimbursed the shareholder for the health insurance and also included the premium payment in the shareholder's W-2, the shareholder would be allowed an above-the-line deduction.
The bottom line is that in order for a shareholder to claim an above-the-line deduction, the health insurance premiums must ultimately be paid by the S corporation and must be reported as taxable compensation in the shareholder's W-2.
Then when preparing your individual tax return with TurboTax and you enter the Schedule K-1 (Form 1120-S) that you receive from the S corp, TurboTax will have a box on the Other Situations page for you to mark to indicate that you personally paid for the health insurance and the S corp paid you wages. This will cause TurboTax to include the amount on Schedule 1 on the line for reporting a self-employed health-insurance deduction. (Even though you are not actually self-employed, this is where the deduction is required to be claimed under these circumstances.)
paid for by the shareholder
Wait, I missed that comment ... paid by the shareholder? Or did you mean paid by the corporation? Or did the shareholder originally pay for it and the corporation reimbursed the shareholder?
The problem I am referring to is that on the 1120S (2022) TT for S-Corps, there is a step by step interview form that comes up for Medical Insurance premiums paid by the officer/shareholder. This box has a vertical category for medical insurance, vision/dental etc. It has 4 horizontal columns, Officer>2%, Officer<2%, shareholder >2% and All Other Employees.
Only if I enter the amounts in the "All Other Employees" column does the amount flow correctly to Line 18 on the 1120S. If I enter the amounts elsewhere, nothing flows through.
Why? What am I missing? Thanks in advance.
Line 18 is only for the cost of health insurance for those who are not officers or >2% shareholders. Insurance paid for those individuals goes on line 7 or line 8. See the instructions for Lines 7 and 8 of Form 1120-S and see chapter 6 of IRS Pub. 535. The S-corp gets a deduction for wages paid, reports the taxable wages on your W-2 and, as I explained above, a >2% shareholder takes the deduction on their individual tax return, line 17 of Schedule 1 (Form 1040). The result is that FICA must be paid on the amount paid for the health insurance of >2% shareholders.
Still have questions?Make a post