The IRS requires that an S-Corporation shareholder report the amount paid for each officer’s health insurance as additional wages on Form W-2 Box 1 as well as a separate disclosure in Box 14.

You will not incur additional taxes because of this change.  This is for reporting purposes only.

The next time you call in your payroll please do the following:

• Let the payroll company know you are an S-Corporation and that you need to include the officer’s health insurance premiums on the 2023 Forms W-2.
• Provide the dollar amount of health insurance premiums (medical and dental) paid on your behalf for 2023. Remind the payroll service that no taxes are to be withheld on this money and the amount should not be included in your paycheck.  It is for reporting purposes only.  The amount of the health insurance premiums should be added to Box 1 and Box 14 on the Form W-2.
• If the Company pays your disability insurance and you would like to deduct it, please call us for instructions.

For example, if the corporation paid $5,000.00 in health insurance premiums for a shareholder and their earnings for the year were $100,000.00 then the amount in Box 1 would show $105,000.00 and Box 14 would show $5,000.00.  In addition, if any of the shareholders’ spouses or children are working for the corporation and are covered under their own insurance plan then the same rule applies to them.

If the above procedure is not followed, you will not be able to claim the deduction for the officer’s health insurance on the 2023 corporation or personal tax return.

Please contact us with any questions you may have.