Adding a One-Time S Corp Shareholder Health Premium Update
Background
Greater than 2% shareholder employees of an S corporation must have company-paid health, disability, or accident insurance premiums reported as taxable wages to the shareholder, subject to federal and state income tax withholding. However, these wages are not subject to FICA (Social Security and Medicare) or unemployment taxes.
To Enter a Lump Sum For The Year
If you have already run payrolls for the shareholder this year, and need to enter a lump sum of health insurance premiums at the end of the year for taxable wages to be correct on their W-2, follow the steps below.
You can also set up a recurring contribution to happen each time the shareholder-employee is paid. For details, see How To Add S Corp Health Insurance Premiums To Each Payroll.
To enter a lump sum for the year, you will need to make sure you have set up an S Corp contribution at the company level.
Settings > Payroll > Deductions & Contributions
- In the Contributions list, click “Add New.”
- Add a description, such as “S Corp Owner Health.”
- Leave “For Deduction” blank.
- For the Type, choose “Other.”
- For the Method, choose “Fixed Dollar.”
- For Taxability, choose “S Corp Health Insurance.” This will ensure that this money is taxed correctly and shows in the correct boxes on the W-2.
- You can leave the Fixed amount field blank.
- Box 14 label defaults to SEHI, but if you would like you change this you may.
After your company-level S Corp Health Insurance Contribution, you will be able to apply contribution amounts to the shareholder-employees using the Update S Corp Owner Health Insurance tool.
Go to Settings > Payroll Settings > Update S Corp Owner Health Insurance
- Select the employee’s name.
- The effective date of this entry will be December 31st of the current year. You also have from January 1st until January 10th of the following year to add a lump sum for the previous year. After January 10th, the update will be made for the current year.
- Enter the dollar amount of company-paid premiums.
- Click Save.
If you need to make additional updates for the year, you can come back to this page and add more entries. You will see the year-to-date totals of contributions you have entered so far. Each entry you make will also appear on the Payroll Details report for this employee. Any entries you make with the lump sum page will have an effective date of December 31st of that year.
Voiding an S Corp Contribution Entry
If you need to make a correction, you can void entries added from the S-Corp tool by going to Payroll > Payroll Tasks > Void Payrolls. Select the S-Corp entry to void and continue through the void process. Read “How To Void or Cancel A Paycheck” for more details.
Viewing Year-To-Date S Corp Contributions
You can view the year-to-date S Corp contributions entered for employees on the same page that you enter contributions. You can also view these on the Payroll Details Report. Any entries you make with the lump sum page will have an effective date of December 31st of that year, so when running the report, be sure the end date is set to 12/31.
Viewing S Corp Contributions on Form W-2
You can view these updates using the Preview W-2 form report or when you create the actual W-2 forms, the federal and state taxable wages will increase by the amount of the contribution. Box 14 will also show the amount of the contribution with your designated label for Shareholder Employee Health Insurance.
For more information, please visit the Preview W-2 Form help article or How to Download and Print W-2 Forms.
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