Question

WHICH OF THE FOLLOWING IS TRUE REGARDING HEALTH AND ACCIDENT INSURANCE PREMIUMS

HEALTH PREMIUM FOR THE 2% SHAREHOLDERS CANNOT BE TREATED AS WAGES.

INCLUDED ON THE 2% SHAREHOLDERS FORM W2 AND NOT SUBJECT TO FICA OR MEDICARE WITHHOLDING

THEY MUST BE DEDUCTED ON THE S CORPORATIONS FORM 1120S

MUST BE INCLUDED ON 2% SHAREHOLDER FORM W2 ONLY IF THE S CORPORATIO DOES NOT HAVE A PLAN FOR OTHER EMPLOYEES.

Answer 1

Solution: The TRUE STATEMENT IS: Health And Accident Insurance Premiums MUST BE INCLUDED ON 2% SHAREHOLDER FORM W2 ONLY IF THE S CORPORATIO DOES NOT HAVE A PLAN FOR OTHER EMPLOYEES.

Explanation: Health and accident insurance premiums paid on behalf of the greater than 2-percent S corporation shareholder-employee is allowed as a deduction by the S corporation and is allowed to be disclosed as wages on the shareholder-employee’s Form W-2, subject to the provision of income tax withholding.. If the premiums are paid to or on behalf of an employee under a plan that makes a provision for all or a class of employees (or employees and their dependents) then these additional compensation or wages are not subject to the social security tax or the Medicare(FICA)or the Unemployment Taxes and are included in the shareholder-employee’s Box 1 (Wages) of Form W-2, Wage and Tax Statement, but is excluded from Boxes 3 and 5 of the Form W-2.