S Corp shareholder after tax health insurance for family

S corp Shareholder pays $8,000 in an after tax payroll deduction for wife and kids to be on company plan.

(Shareholder’s personal health insurance is paid by the company and is in box 1 and 14. No issues there.)

Where do I find the description of how this should be shown on his W2? I need to send it to the company bookkeeper. Would like it to come from an IRS Pub or otherwise official explanation if possible. (It should be included in box 14 and qualifies for SEHI right?)

Also, I am guessing I need to reduce QBI for this particular SEHI deduction that relates to the after tax deduction portion. (I have not been reducing QBI for shareholder's SEHI that has already been deducted on the 1120S.)

It's already included in Box 1. No need to change anything.

Increase his SEHI deduction on his 1040 by the amount he paid. That's it.

Thanks Capt. I concur.

But I believe the after tax health insurance paid for the family should also be reported in Box 14 on the shareholder's W2 (along with the insurance the company paid for the shareholder).

I am trying to convey that to the bookkeeper, but I can't find any place that actually says that.

Box 14 is solely informational. It's not binding and not required. Not worth it to create any animosity with a bookkeeper over an informational item.

Thanks Capt. Maybe it is not required. But I have to amend the last three year's returns, because there was no record of after tax health insurance paid for the shareholder's family anywhere. I ain't Kreskin!

If it isn't noted in box 14, how does anybody know about it?

If it isn't noted in box 14, how does anybody know about it?

When you reconcile box 1,3,and 5, it only makes sense.
As for the after tax premiums, you'll need the final paystub with ytd figures.
No different than we used to do with union dues

What do you mean with paid with after tax dollars? It's paid with pre-tax dollars. Box 1 on W-2 gets increased by the S Corp shareholder health insurance which should include insurance for his or her family. The S Corp Shareholder health insurance is taxable for income tax, technically that is, but get offset on the 1040 by the same amount. It's not paid with after tax dollars. It's not taxed because it gets deducted on the 1040. Yes, you're right that ideally this amount is reported in box 14 of W-2. Apparently, this is optional. Box 1 needs to show the full amount for shareholder and his or her family's health insurance. Why is there a difference being made between the shareholder and the insurance for his or family, at least that is as I understand your question.

My impression of 'after tax' in this instance had to do with FICA taxes.

My question was specific to an S corporation shareholder’s “after tax payroll deduction” for his family's health insurance. A situation that is not uncommon and you might be missing out on a deduction for your client if you are not on the lookout for it.

(I was NOT asking about a shareholder's health insurance paid for by the company that is reported in Box 1 and box 14 on this W2.)

I have done more research since posting my question. Here is my understanding from what I have learned:

1) It is not uncommon for shareholder’s to have their personal insurance paid for them by the company, but to pay for their family's insurance through an after tax payroll deduction. My understanding is that this has something to do with avoiding a discriminatory plan.

2) I talked to a tax specialist at ADP regarding how this is reported on a W2. They said, the income to pay for the “after tax deduction” would show up in box 1, 3 and 5. It should also be reported in box 14. This is their standard practice.

3) If the health insurance plan is established under the S corp, then the amount paid for insurance through the “after tax deduction” is deductible as self employed health insurance on the shareholder’s 1040 (if it otherwise qualifies).

4) As far as I can tell, this SEHI deduction related to the “after tax deduction” does not reduce QBI, because it is paid from W2 comp. This is not as clear, but I talked to an author/leading expert on Section 199A issues and that was his take on things.

This information was hard to come by, there isn’t a lot on the internet or in my research tools. I did find a discussion from tax almanac that addressed the issues, but it did not bring things to a clear conclusion. It is a good summary of the issue though and worth reading.

http://www.taxalmanac.org/index.php/Discussion_Calling_all_S_Corp_SEHI_deduction_experts%21.html