Why LLC over scorp health insurance on w2 [Definitive Guide]



Last updated : Sept 24, 2022
Written by : Rhiannon Kolenda
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Why LLC over scorp health insurance on w2

Do S Corp shareholder health insurance premiums go on w2?

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.

How does S Corp handle health insurance on w2?

The amount of the premiums must be included in your employee wages on your annual Form W-2, and you must include the amount as wages on your Form 1040. Your S corporation deducts the amount as employee compensation on its own return.

Does an S Corp have to offer health insurance to all employees?

S Corp Policy Choices S Corp Discrimination, which means that the business doesn't provide health insurance to all eligible employees. Therefore, the S Corp will pay all health insurance premiums. The business will also be responsible for paying Social Security and Medicare tax.

Can a S Corp pay health insurance premiums for owners only?

Yes! If you are a greater than 2% owner of your S corporation, you can have your health insurance premiums paid by your business.

Where does 2 shareholders health insurance go on W-2?

Health Insurance for S Corporation 2% Shareholders: Reporting to the shareholder. The cost of health insurance premiums paid by the S corporation for a 2% shareholder is included in the shareholder's W-2 as Box 1 taxable income. The amount is subject to federal income tax withholding.

How do I record S corp health insurance?

Add health insurance costs to gross wages on your W-2 S corporation owners who participate in management are considered employees, which means they're issued a W-2 every January. In W-2 box one, gross wages include healthcare costs your S corp paid during the year.

Can a W-2 employee deduct health insurance?

Would health insurance be deductible? Premiums for company health insurance are not tax-deductible. Employers deduct premium payments from your paycheck on a pretax basis. Since your employee contributions are already taking advantage of tax savings, you can't deduct them again on your return.

Can a business owner deduct medical expenses for an S-corp?

The business must pay the S-corp owner's premiums directly. If the S-corp owner does qualify, they can deduct their premiums on Form 1040, line 29. S-corp owners can use this method to deduct premiums for accident, dental, and long-term care policies as well as for health insurance policies.

Is S-corp shareholder health insurance subject to FICA?

Contributions made to a shareholder-employee's health benefits plan are subject to state and federal income tax withholding. However, these contributions are not subject to Social Security and Medicare (FICA) taxes or unemployment tax.

Can I take the self employed health insurance deduction If I have an S Corp?

Self-employed health insurance deduction for S corporations If the health insurance premiums were ultimately paid by the S corporation and were reported as taxable compensation on the shareholder's W-2, the shareholder-employee can also claim a tax deduction on their Form 1040.

Can S Corp pay employee medical expenses?

S-corporations can provide health insurance as a tax-free benefit to their non-owner employees. This means the company offers group health insurance to employees and deducts the cost as a business expense, paying no taxes on the insurance premiums.

Can I deduct my health insurance premiums through my business?

If your business has employees and you pay health insurance premiums for them, these amounts are deducted on the applicable tax form and line for employee benefit program expenses. For example, if your business is a sole proprietorship, you deduct premiums paid to provide health coverage to employees on Schedule C.

How do I add S-corp health insurance to W-2 in QuickBooks?

  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Pay types, select Start or Edit.
  4. In Additional pay types, select S-corp Owners Health Insurance.
  5. Enter an amount. Or leave it blank, then enter the amount as you run payroll.
  6. Select Save.

Can S-corp deduct long-term care premiums?

Tax-Qualified Long-Term Care Insurance premiums paid by a S-Corporation on behalf of an employee are fully deductible providing the S-Corporation retains no interest in the policy. This would also apply to premiums paid on behalf of the employee's spouse and other tax dependents.

Why do I have 2 w2s from the same company?

You might get more than one W-2 if you work for an employment agency or your company changed ownership or payroll providers. If your W-2s are identical down to the last number and letter, just enter one of them. Keep the duplicate with your tax records or securely destroy it.

How do I report health insurance for two shareholders?

  1. Form W-2, Wage and Tax Statement.
  2. Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.
  3. Form 941, Employer's Quarterly Federal Tax Return.

Who is considered a 2 shareholder for health insurance?

For purposes of § 1372, the term “2-percent shareholder” is any person who owns (or is considered as owning within the meaning of § 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined ...

Where do I deduct health insurance premiums on 1120s?

Health Insurance Premiums for a more than 2% shareholder of a S-Corporation are reported in Box 14 of the individual's Form W-2 Wage and Tax Statement.

What expenses can a W-2 employee write off?

  • Union dues.
  • Tools.
  • Dues or subscriptions to professional societies.
  • Licenses.
  • Travel and meals for business, including DOT per diem.
  • Home office.
  • Excess educator expenses.
  • Education that either maintains or improves job skills or is required to keep your salary or job.

Do health insurance premiums reduce taxable income?

Employer-paid premiums for health insurance are exempt from federal income and payroll taxes. Additionally, the portion of premiums employees pay is typically excluded from taxable income.


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Why LLC over scorp health insurance on w2


Comment by Howard Clem

Thanks for this great article


Thanks for your comment Howard Clem, have a nice day.
- Rhiannon Kolenda, Staff Member


Comment by car16intn

Thanks for this interesting article


Thanks car16intn your participation is very much appreciated
- Rhiannon Kolenda


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