If I follow IRS FAQ 33 and deduct the shareholder health insurance on both the entity level & the 1040 - which seems completely unfair - but if I do this I have to make a manual adjustment because Lacerte does not do this automatically - but I ran across a situation today that makes it seem even crazier to me. This is a case where I have 2 shareholders & they each have a different amount of health insurance - I changed the numbers here to make it simple but this is basically my situation, any thoughts please?
Shareholders have 20/80 ownership and the 20% owner has 15k in health insurance and the 80% owner has 5k health insurance.
If I put the health insurance on other deductions on the entity level then the 20% shareholder will have to deduct 4k for health insurance and the 80% would deduct 16k. (Total health ins for both is 20k so (20,000 x 20% =4,000)
Then on the individual level the 20% owner would deduct 15k (his actual insurance) and the 80% owner would deduct 5k. That makes no sense at all - would that be how they are saying to do it? On a partnership return you can do special allocations but I don't think you can do that on a 1120S - so I think they would have to take the total health ins (20k) times the ownership percentage. I don't see how that could be right - any thoughts?