See exceprt below from IRS
regarding S corp owners and health insurance. You can deduct health insurance that is included in your W-2
S Corp Shareholder
-Employees - Reporting Health & Accident Insurance Premiums
Headliner Volume 41
February 12, 2003
This TEC “Headliner Package” describes the Correct IRS Forms
for Reporting Health & Accident Insurance Premiums for greater than 2% S Corp Shareholder-Employees. The recommendation for this Headliner came from the SB/SE subgroup of IRPAC (Information Reporting Program Advisory Committee).
The IRS would like to clarify the proper reporting of S corporation payments of health and accident insurance premiums made on behalf of its greater than 2% shareholder-employees continues in the manner reflected in Revenue Ruling
91-26, 1991-1 CB 184, as clarified in IRS Announcement 92-16, 1992-5 IRB 53.
The cost of these health and accident insurance premiums paid on behalf of the greater than 2% S corporation shareholder-employee (hereafter referred to as “shareholder”) is deductible
by the S corporation and reportable as additional compensation
to the shareholder.
This additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax
Statement issued to the shareholder. If these payments are made under a “plan” for the S corporation employees and their dependents
, the amount would only be subject to income
, and would not be included in Boxes 3 or 5 of Form W-2 wages for Social Security or Medicare
, nor would it be subject to the FUTA
tax. Form K-1 (1120S) and Form 1099 should not be used as an alternative
to the Form W-2 to report this additional compensation.
The payments of the health and accident insurance premiums on behalf of the shareholder may be further identified in Box 14 (Other) of the Form W-2.