| Is there a way for an owner (48%) to list premiums as a company expense so that they are not taxed? Or must they be listed on their W2's as a bonus so that they are taxed?==>>>>>>>>>>>>> The general rule is that the health insurance of a greater than 2% S corp owner/shareholder is a taxable fringe benefit. In other words, health insurance premiums paid by an S Corp for more than 2% shareholders are treated as wages to that owner. The only way an S Corp can deduct the amount paid for shareholder health insurance is to include it as part of the shareholder’s salary; the owner’s health insurance can no longer be called an insurance expense or employee benefit expense on the 1120S federal tax return.so, the net income effect for the S corp is the same, but shareholder-employee’s W-2 wages will increase by the amount of the health insurance premiums paid by the S Corp. however, no fica tax is withheld for wages attributed to the insurance premium. The shareholder-employee may be eligible to deduct the medical insurance premiums from their AGI on their 1040 income tax return. Some states have insurance laws that don’t allow a one-employee corp to purchase health insurance for the owner. Then the shareholder has no choice but to buy health insurance in their own name instead of through the corp. so, in order for a shareholder to be eligible to deduct the medical premium from their AGI on their 1040, the corp needs to pay the health insurance provider directly or it needs to reimburse the shareholder and be able to prove reimbursement. If the shareholder purchases the health insurance in their own name and pays for it personally, that shareholder would not be allowed a deduction from AGI. Also,you can claim health insurance deductions for all your employees, but not for your own family at the S corp level. However, aslongas the shareholder or their spouse is eligible to participate in any other subsidized health care plan, then they cannot take a deduction from AGI on their 1040 for the medical insurance paid by the S Corp. The only chance the owner might then get to deduct those premiums is as an itemized deduction on sch A of 1040 and then only for the amount that, combined with their other aggregate medical expenses, exceed 10 % of AGI. The odds are if a shareholder cannot deduct the medical from AGI, they will mostly likely have to pay personal income tax on this benefit.
Clarification: This is in regards to HRA's and IRS 2013-54=====>>>>>>>>Employees who are also owners,i.e., S-Corp shareholders that own more than 2% of the company's shares may use the HRA platform but may not receive the same amount of tax benefits as non-owners.The Owners may receive reimbursement from their companies for medical expenses, and they may use the HRA platform to receive and track these reimbursements. However, reimbursements made to Owners must be reported on the owners' W-2 and 1040 forms subject to federal income tax withholding. These reimbursements are exempt from FICA andFUTA taxes, similar to profits passed through to the owner. Further, the cost of the reimbursements is a deductible expense to the s corp, reducing the taxable income of the s corp and, thus, reducing the taxable income of the owners since these are flow-through tax entities.
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