S-Corporation Shareholder Health Insurance should be on your W-2

Attention S-Corporation Shareholders:

If your business has been paying health/dental/vision insurance premiums (including Medicare premiums) for you and/or your family’s coverage through a qualifying health plan, these premiums may be tax deductible to the business if the proper steps are taken. To qualify, this must be done through required reporting on your W-2 per IRS guidelines. They should be included in Box 1 wages and in Box 14 as “2% Owner S-Corporation Shareholder Insurance” on your W-2. This is for your personal health/dental/vision insurance premiums paid by the business through a cafeteria plan, or your health/dental/vision insurance premiums paid personally and reimbursed by the business. This only applies to 2% or more Shareholders, not to all employees. Premiums paid through a spouse’s employer provided coverage should not be included.

This reporting requirement also applies if you are on a company plan, not just an individual/family policy.

Additionally, if you have been contributing to a qualifying retirement plan during 2023, please make sure these are being recorded correctly by your payroll company on your W-2. And that all employee elective deferrals/employee contributions are paid in by December 31, 2023.

You need to alert your payroll company as soon as possible to add the amount of health/dental/vision insurance premiums paid for the 2% Shareholder Health Insurance as well as any retirement contributions. The IRS requires the health insurance be paid by the business and reported on the Shareholder’s W-2 for it to be deducted on your personal tax return as well as the retirement contributions. If these steps aren’t taken, then the health insurance of 2% shareholders is not considered a valid tax deduction. If the W-2 needs to be amended, most payroll companies charge a fee for doing so. Therefore, it is important to have this correct before the end of the year.

The reporting requirement also covers anyone that receives a W-2 that is directly related to the 2% owner. This includes spouse, children, grandchildren, and parents of the 2% owner that may work for you.