S Corporation Fringe Benefits MUST Be On The Applicable W-2
Health care and group term life insurance benefits MUST be included on Form W-2 for the shareholder/employee and must be part of a "plan" in order to avoid being subject to Social Security taxes and to be tax deductible by the Corporation. The corporation deducts the health care fringe benefits for shareholder/employee and includes the amount in the W-2. Even though the amount is included in the shareholder/employees gross income, it is fully deductible on page one of their individual return. If you are the only employee and pay your own health insurance, then the company must pay the premium or reimburse you for it. Immediate family members who are employees of the S corporation are deemed to be shareholders for the purpose of reporting health insurance in their W-2. If the amount is not included in the W-2, it is treated as a non-deductible expense for income tax purposes. Please review your situation to ensure you are complying with the laws. If you need any clarification, please feel free to contact us.