1120-US: Allocation of health / medical insurance premiums to a single shareholder (FAQ)

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Question

How are health / medical insurance premiums allocated to a single shareholder?

Answer

Under Notice 2008-1, in order for a two percent shareholder-employee to deduct the amount of the health insurance premiums under IRC Section 162(l), the S Corporation must report the health insurance premiums paid or reimbursed as wages on the two percent shareholder-employee's Form W-2 in that same year. In addition, the shareholder must report the premium payments or reimbursements from the S Corporation as gross income on their Form 1040.

However, if the health insurance premiums were not included in the shareholder's Form W-2, and you want to show the premiums on Form 1120S, Schedules K and K-1, enter the appropriate amount in the Shareholder health insurance field for each shareholder via the View > Shareholder Information > Other Info tab.

UltraTax CS transfers the shareholder health insurance to Schedules K and K-1 based on the option entered in the Shareholder health insurance shown on Schedules K and K-1 field in Screen K. If you enter 1 in this field or if the field is blank, UltraTax CS transfers the amount to Nondeductible expenses on Schedules K and K-1. If you enter 2 in this field, UltraTax CS transfers the amount to Other items and amounts on Schedules K and K-1.

If the health / medical insurance premiums are included in the shareholder's Form W-2, you should not enter the amount in the Shareholder health insurance field in the Other Info tab in the Shareholder Information window unless you want to show the health insurance premiums as Other items and amounts on Schedules K and K-1. To do this, enter 2 in the Shareholder health insurance shown on Schedules K and K-1 field in Screen K.

Related topic: 1120-US: Form 1120S - common FAQs

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