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Taxpayer has a S corp, the only activity the S corp has is…

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Taxpayer has a S corp...
Taxpayer has a S corp, the only activity the S corp has is owned 30% of a partnership. The S corp is consider a passive partner in the partnership since it does not engage in management decision etc. There is no salary draw by the shareholder in this S corp. Can the taxpayer treat the health insurance expenses as adjustment to income and report it in page 1 of Form 1040 instead as itemize deduction on Schedule A?
Submitted: 9 months ago.Category: Tax
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9/21/2017
Tax Professional: Lev, Tax Advisor replied 9 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,984
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In short :

No - if no wages are reported.

Yes - if wages are reported om W2.

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Customer reply replied 9 months ago
Generally speaking S corp require owner to draw salary. Does this S corp require to draw salary since it only has ownership in a partnership, no other activties?
Tax Professional: Lev, Tax Advisor replied 9 months ago

The IRC establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes.

The instructions to the Form 1120S, U.S. Income Tax Return for an S Corporation, state "Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation."

The key to establishing reasonable compensation is determining what the shareholder-employee did for the S corporation.

So - generally speaking there is NO such requirement always to pay wages.

If an officer does not perform any services or only performs minor services and is not entitled to compensation, the officer would not be considered an employee.

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Tax Professional: Lev, Tax Advisor replied 8 months ago

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