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grace8
Level 2

S-Corp Schedule K1 question

For S-Corp Form 1120S where the shareholder is a 2% shareholder:

Where on Schedule K1 should I enter the health insurance amount that was paid (where federal income tax was withheld) so that the shareholder can claim deduction on their 1040 form later?

4 Replies
MinhT1
Employee Tax Expert

S-Corp Schedule K1 question

You should report the amount of health insurance paid on line 17 of schedule K-1 (1120S) with code AC - Other information and describe it as Self-employed health insurance.

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AmeliesUncle
Level 13

S-Corp Schedule K1 question

You can use any method to let the taxpayer know the amount.  There is no need to enter it on the K-1.  Although you could put it on Line 17 with code AC, there is no need to do so.

 

The usual method is to put a notation in Box 14 of their W-2.

 

That amount was added to Box 1 of their W-2s, right?

 

What do you mean by "(where federal income tax was withheld)"?

AmeliesUncle
Level 13

S-Corp Schedule K1 question

When entering the K-1, there will be a check-box about health insurance.  Check that box and answer ALL of the followup questions (including when it asks you for Box 5 of your W-2).

Anonymous
Not applicable

S-Corp Schedule K1 question

here is from the IRS instructions for the line for compensation to officers

Report amounts paid for health
insurance coverage for a more-than-2%
shareholder (including that shareholder's
spouse, dependents, and any children
under age 27 who aren't dependents) as
an information item in box 14 of that
shareholder's Form W-2. A more-than-2%
shareholder may be allowed to deduct
such amounts on Schedule 1 (Form 1040
or 1040-SR), line 16. To find out if the
shareholder can claim this deduction, see
Self-Employed Health Insurance

 

so the answer is it goes on your w-2 as line 1 compensation and is added to the compensation to officers on line 7 on the 1120S page 1.

failure to include it on w-2, if caught,  then corp gets no deduction and shareholder gets no deduction on 1040.

 

the amount included in wages is then footnoted in box 14 of w-2.  when doing 1040, you'll have to input this amount to get the deduction.     the IRS should really add a code for box 12, but it doesn't exist presently

you can also include the amount as a footnote for line 17d of Schedule K.  

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