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Insperity and S Corporation Medical Insurance

Technical topics regarding tax preparation.
#1
irc162  
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My client is a more than 2% shareholder in an S Corporation. The company does their paryoll through Insperity. She is having a great deal of trouble getting Insperity to handle her medical insurance correctly. If you have experience with S Corp med insurance thorugh Insperity, can you please tell me how you coded this on their paryoll input forms. First, Insperity excluded her med premiums from W-2 wages. Then they gave her a form to fill out showing the premiums as a post tax deduction---the same form that is used for union dues---with no indication that the premiums are not to be included in FICA or Medicare wages. She has talked to several people at Insperity and they don't seem to have a clue. We sent them a copy of the IRS instructions regarding S Corp Med insurance but that did not help.
 

#2
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My clients with ADP and Paychex can't seem to get the information to them in time to get it in their W-2's, so I prepare a second W-2 with the health insurance information on it. No need to amend any 941's for that, just prepare a second W-2 with only the health insurance information on it. Been doing this for years with absolutely no problem.
 

#3
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Seaside CPA wrote:My clients with ADP and Paychex can't seem to get the information to them in time to get it in their W-2's, so I prepare a second W-2 with the health insurance information on it. No need to amend any 941's for that, just prepare a second W-2 with only the health insurance information on it. Been doing this for years with absolutely no problem.


Shouldn’t the insurance increase box 7 of the W2???? This increased amount is then deducted on the return.
 

#4
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Southparkcpa -- why would this increase box 7? Thats social security tips.
This is probably the April 14th version of me talking, so ignore this terrible advice -- in your software, adjust the wages line up by the amount that should've been included in Box 1 (only) of the W2. This practically accomplishes the same thing. Then, take the deduction on the SEHI adjustment line below for the same amount.
Fighting with the payroll provider is a fight worth fighting in the offseason, not during tax season in crunch time. Just my two cents.
 

#5
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Seaside, I did what you suggest one year. A local payroll company just couldn't get the W-2's right, or they just refused to adjust, I don't remember which right now. So I amended the W-2's to include S Corp Med. They were seriously displeased with me and accused me of fraud. The client switched companies that year, and I'm not sure the payroll service is still in business. We have a continuing problem with another company who is doing employee leasing and getting the W-2's right each year is always a problem. After awhile, I even begin questioning myself because it's such a battle. Which I don't really understand. I prepare payroll for other clients and I don't have a problem getting it right.
 

#6
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This is probably the April 14th version of me talking, so ignore this terrible advice -- in your software, adjust the wages line up by the amount that should've been included in Box 1 (only) of the W2. This practically accomplishes the same thing. Then, take the deduction on the SEHI adjustment line below for the same amount.


That advice is fine, but you’ll want to amend the W2 later. And that corrected W2 will agree with what is showing on the guy’s 1040. You can correct the W2 in a full-blown kind of way or you can just do what Seaside suggests. Or, don’t correct the W2 until such time that the taxpayer gets audited, if ever.
 

#7
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regicide9 wrote:Southparkcpa -- why would this increase box 7? Thats social security tips.
This is probably the April 14th version of me talking, so ignore this terrible advice -- in your software, adjust the wages line up by the amount that should've been included in Box 1 (only) of the W2. This practically accomplishes the same thing. Then, take the deduction on the SEHI adjustment line below for the same amount.
Fighting with the payroll provider is a fight worth fighting in the offseason, not during tax season in crunch time. Just my two cents.


I meant box 1, federal wages I don’t work Sundays and was watching the masters.
 

#8
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Southpark, yes, report insurance premiums in Boxes 1, 14 & 16. Per the General Instructions for Form W-2, you need to reconcile the amounts in boxes 2, 3, 5 & 7 from all W-3's with the amounts on the quarterly 941's, so no need to change the 941's.

Actionbsns, I do not amend the payroll company's W-2's. I issue a second one.
 

#9
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Seaside CPA wrote:Southpark, yes, report insurance premiums in Boxes 1, 14 & 16. Per the General Instructions for Form W-2, you need to reconcile the amounts in boxes 2, 3, 5 & 7 from all W-3's with the amounts on the quarterly 941's, so no need to change the 941's.

Actionbsns, I do not amend the payroll company's W-2's. I issue a second one.


But if you issue a 2nd W2..the "total wages" of all 4 941's now don't equal the W2's. When you say "issue" a W2, do you mean send it to social security?
 

#10
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The "total wages" in boxes 2, 3, 5 & 7 equal the 941 amounts, which is what is reconciled to the 941 (per their instructions). Evidently, they do not reconcile to box 1.

Yes, send the W-2 (for health insurance premiums) everywhere you normally send a W-2 you prepare.
 

#11
irc162  
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Part of the problem here is that the client is paying too much SS and Medicare tax. Med Insurance premiums get included Box 1 wages but are excluded from SS and Medicare wages. What the taxpayer would really like is to know how to get Insperity to correctly input her medical insuarnce premiums so they are handled correctly for payroll tax purposes. But If I understand correctly, this is a common problem for payroll companies and the client may be SOL on that?
 

#12
Wiles  
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Tell them it’s ESPP income.
 

#13
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Seaside CPA wrote:The "total wages" in boxes 2, 3, 5 & 7 equal the 941 amounts, which is what is reconciled to the 941 (per their instructions). Evidently, they do not reconcile to box 1.

Yes, send the W-2 (for health insurance premiums) everywhere you normally send a W-2 you prepare.



Interesting.... I always assumed that the taxable wages line on 941's MUST agree to taxable wages line on all W2's.
 

#14
Jimi  
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With all the PEO services like Inspirity, it has never been clear to me who has what income tax attribute. I report wages as if the client did their own payroll but in the number of W2s box I put zero and N/A for payroll tax returns.

When using a PEO, is the owner of the underlying business a 2% owner or just a regular employee?
 


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