As a pass-through entity, S corporation profits, losses and deductions go directly to the owners or shareholders. A more than 2% shareholder of an S corporation is not eligible for this exclusion.. You must correctly report premiums on your business and personal tax returns. You cannot take the deduction if you are able to receive health insurance coverage through another employer, including your spouse’s employer. The premiums are also noted in box 17 of the K-1. In turn, the owners then pay the business taxes as part of their personal taxes. However, with health Insurance for S Corporation 2% shareholders, the 2% shareholder may be able to deduct the cost of the premiums on his Form 1040. To enter the Officer Heath Insurance on the Schedule K-1, box 17: Go go Screen 33, Schedule K-1 Overrides. When you view the W-2 Summary Report or download the actual W-2 form, the year-to-date S Corp Health contributions will be added to the total in Box 1 for federal taxable wages, Box 16 for state taxable wages, and Box 14, with the label “SEHI” for Shareholder Employee Health Insurance. The cost of health insurance premiums paid by an employer is usually excluded from taxable income on the employee’s W-2. The most important thing to remember is that 2% shareholder health insurance is considered wages, tips, and other compensation in box 1. The health insurance could be entered on the Schedule K-1, box 17 and an adjustment for Expenses on books not on Schedule K entered on the Schedule M-1. FAQ - How Do I Report Health Insurance Premiums Paid to 2% Shareholders on W-2s? Select the affected Shareholder name at the top of the left hand column. The only thing you need is the W-2 form, and a little guidance. This article provides one example (with notes and tips) of how to set up and process 2% shareholder/officer health insurance. Shareholder/officer health insurance can be set up in Accounting CS in a number of ways, depending on how you want the insurance amount to display on forms W-2, 940, and 941. You must include the amount of the S Corp shareholder health insurance premium in the employee’s taxable wages. If you are completely baffled about how to include 2% shareholder health insurance, don’t be! How do I complete a W-2 for 2% shareholder insurance? My corporate tax accountant has instructed me to report our health insurance premiums on line 29 of the 1040. My husband is a dentist and 100% shareholder of the S Corp. Our families' health insurance premiums are reported in box 14 of his W-2. The way your payroll items affect your tax reporting depends on the Tracking Type you selected during the setup.In your case, since the S-corp item didn't flow on box 16 of your W-2 form, we can create a Wage Base adjustment to get your work done. And, the premium amounts are taxable for your employees. I agree that if the health insurance benefit for a 2% S-corp shareholder is included in W-2 Box 1, it is included in plan compensation (we use W-2 definition) and 415 comp. How to Report Health and accident insurance premiums paid on behalf of a greater than two percent S corporation shareholder-employee are deductible and reportable by the S corporation as wages for income tax withholding purposes on the shareholder-employee's Form W-2. We have an S Corporation with a health insurance plan. Also, the amounts in Box 1 attributable to insurance premiums are then broken out in Box 14 of the W-2. So, on your Form W-2, this should be included as gross wages. Viewing the contribution on the W-2. 2% shareholder health insurance. If you provide health insurance to employees who own more than 2% of stock in your S Corp, the premiums are tax deductible for your company. Here are four examples of what this looks like in the real world: Hi there, virtuebuilder, Thanks for joining the conversation. I can help you get past the issue with the S-corporation payroll item on your W-2 form. The S corporation can, however, report the value of insurance in Box 14 of Form W-2 so that the shareholder has enough information to determine any potential self-employed health insurance deduction. The main benefit the shareholder/employee receives from reporting the insurance premiums on his or her W-2 is the option to take the health insurance premiums as a deduction to gross income on line 29 of page one of the shareholder’s 1040. Note: If payroll is outsourced, it’s important to identify which employees are greater-than-2% shareholders. 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