Ins. premiums for S corp. when employers are reimbursed

[Customer Service]

Including Insurance Premiums for S Corporation Shareholders on W-2s when the shareholder pays the premiums and is reimbursed


S Corporations that reimburse 2-percent employee-shareholders for accident or health insurance premiums must include those reimbursement payments as income for federal income tax withholding purposes on the Shareholder's W-2.

To accomplish this, you set up an income for all shareholders. Then use Calculate Payroll periodically to reimburse shareholders for the premium payments. This adds the premium payments to taxable income on 941s and W-2s.
Setting up the Income

Run Payroll/Configure/Income
Name: Shareholder insurnce (20-char limit)
Earnings Subject to: US FIT
Additional W-2 reporting: Fringe benefit
Contribution Method: Amount per pay period
G/L account: <health insurance expense account>
Amount: $0.00

Run Payroll/Configure/Employees
Assign this income to all relevant shareholders.

Reimbursing employee-shareholders on a regular paycheck.

1. Run Payroll/Calculate Payroll. For each employee-shareholder –
2. Make a note of the total tax withholding amount.
3. Enter the amount of the reimbursement.
4. Adjust the tax withholding amount back down to the pre-reimbursement total.

Reimbursing employee-shareholders on a separate check.

1. Run Payroll/Calculate Payroll. For each employee-shareholder –
2. Enter the amount of the reimbursement.
3. Zero out all other amounts, including all tax withholdings.

The amounts will show on W-2s and 941s.