Ins. premiums for S corp. when employers pay premium

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Including Insurance Premiums for S Corporation Shareholders on W-2s when employer pays the premiums

S Corporations that pay accident or health insurance premiums on behalf of a 2-percent employee-shareholder must include those payments as income for federal income tax withholding purposes on the Shareholder's W-2.

To accomplish this, you set up a zero-value noncash benefit for all shareholders. Then use employee adjustments (quarterly for 941; yearly for W-2) to increase the non-cash benefit and the earnings subject to FIT by the premium payments. This adds the premium payments to taxable income on 941s and W-2s.

Setting up the Non-cash Benefit

Run Payroll/Configure/Noncash Benefits
Name: Shareholder insurnce (20-char limit)
Earnings Subject to: US FIT
Additional W-2 reporting: Fringe benefit
Contribution Method: Amount per pay period
Amount: $0.00
Ceiling: $0.00

Run Payroll/Configure/Employees
Assign this benefit to all shareholders.

Making the employee adjustments once per year (and quarterly to affect the 941) –

1. Run Payroll/Employee Adjustments.
2. Enter the period and date.
3. In the Factor column, select US FIT - Earnings subject to (no ceiling).
4. In the Value column, enter the amount (normally the total premium amount you paid on behalf of the shareholder for the quarter or year).
5. In the Factor column, select Shareholder insurance.
6. In the Value column, enter the amount (normally the total premium amount you paid on behalf of the shareholder for the quarter or year).
7. Save and post the adjustments.

The amounts will show on W-2s and 941s. Neither of these entries affects the General Ledger.