2 Shareholder Health Insurance Form 940

A 2 percent shareholder employee is eligible for an above the line deduction in arriving at adjusted gross income agi for amounts paid during the year for medical care premiums if the medical care coverage was established by the s corporation and the shareholder met the other self employed medical insurance deduction requirements.

2 shareholder health insurance form 940. A more than 2 shareholder may be allowed to deduct such amounts on form 1040 line 29. 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. As exempt on line 4 of form 940 as a fringe benefit. 2 shareholder health insurance.

The s corporation does. On form 940 report the value of health insurance on lines 3 and 4. The tax withheld amount on these forms will not increase. Too often these payments are not included in wages because the premiums are paid along with those for rank and file employees.

And be shown in box 14 on the w 2 form. The health insurance amount is being recorded as a year end adjustment. If you are completely baffled about how to include 2 shareholder health insurance don t be. The s corporation receives a deduction for health insurance of greater than 2 shareholders as compensation wages on line 8 or 9 of form 1120s depending on whether the shareholder is an officer.

The cost of health insurance premiums paid by an employer is usually excluded from taxable income on the employee s w 2. The following guidelines should be followed to report on form w 2 the cost of the medical insurance paid by the s corporation on behalf of a 2 percent shareholder 2employee. However s corp health insurance for 2 shareholder employees is an exception to the nontaxable health benefit contribution rule. The only thing you need is the w 2 form and a little guidance.

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. And the premium amounts are taxable for. 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 are not dependents as an information item in box 14 of that shareholder s form w 2. Choose setup payroll items and add a new pay type item called 2 shareholder health or something similar.

Box 2 wages include health insurance payments box 5a social security 5c medicare wages do not include health insurance payments form 940 preparation. The most important thing to remember is that 2 shareholder health insurance is considered wages tips and other compensation in box 1. The value of health insurance for greater than 2 shareholders is subject to federal income tax fit withholding though. On line 3 of form 940 as futa wages.

How do i complete a w 2 for 2 shareholder insurance. The insurance is treated as supplemental wages for withholding purposes. A more than 2 shareholder of an s corporation is not eligible for this exclusion. The health insurance premiums are additional wages reportable in box 1 wages of form w 2 and box 16 state wages and are subject to federal and state income tax withholding computed using the rules for withholding on supplemental wages.