Medical Ins Benefit for SCorp

[PSBConsult]

I have payroll set up for my S-Corporation. The S-Corp pays my Medical Insurance. According to how I interpret the IRS requirements in the following paragraph I need to report the Insurance Premium as wages that are taxable as Income but not part of Social Security or Medicare Wages:

From Wage Compensation for S Corporation Officers FS-2008-25, August 2008
"The health and accident insurance premiums paid on behalf of the greater than 2 percent S corporation shareholderemployee are deductible by the S Corporation as fringe benefits and are reportable as wages for income tax withholding purposes on the shareholder-employee’s Form W-2. They are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. Therefore, this additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax Statement, issued to the shareholder, but would not be included in Boxes 3 or 5 of Form W-2."

How are people setting up the Company and Employee deductions table(s) and Employee transactions to show the premiums as wages taxable as income but not subject to Social Security Medicare or Unemployment taxes?

thanks

[Paul Mayer]

PayWindow does not support any additional pay types other than what we have and there is no way to mark payments like that as non-taxable. We only handle reporting non-taxable deductions.

If someone has come up with a work around, let's hope that they reply to this thread.

[PSBConsult]

Thanks for the reply Paul.

I've tried some different things and I may have found a work around. Basically I created a deduction titled Medical. I've checked the boxes for FICA, MEDI, FUTA, SIT, SUTA, and SDI.

I did not set any regular deduction for the employee.

In the pay transaction window I'm treating the Medical Premium as a Bonus and entering the amount in the Bonus block. In the Details 4 window I'm entering the same premium amount as a medical deduction. Then select the Pay button.

It appears that the Bonus is showing as part of wage in the Fed 941 line 2 wages. Additional Fed Tax is being deducted. The insurance premium amount is not being included in the 941 line 5a Taxable Social Sec wages nor in line 5c Taxable Medicare wages. Also no increases in State Tax, FUTA SUTA etc.

Does this all make sense? Any flaws in what I'm proposing?

thanks
Gene

[Paul Mayer]

I think you nailed that one. The logic all seems to do just what you needed. Very Good!

[KisInc]

I need to accomplish the same thing. I am comparing this solution to "gluck"'s solution posted in March 2008. Do you believe that this latest option is "cleaner" than from the option proposed in March 2008?

Does anything need to be entered as a code for the yearend W-2 section within the company setup?

Thanks!

[Paul Mayer]

This one seems to be the best so far. This year we started working on a major upgrade that will allow user configurable pay types which will be the real solution.

[JDN]

This one seems to be the best so far. This year we started working on a major upgrade that will allow user configurable pay types which will be the real solution.

Hi Paul - I am in first year using PayWindow, and have this same issue with S-Corp shareholders who have company-paid medical insurance premiums that need to be added to their gross pay. I was just wondering if a specific procedure had been developed for this situation since this post?

Thank you.

[Paul Mayer]

Sorry we never were able to create additional pay types. The solution below is what you would need to use.