Are S-Corps reporting the Insurance Benefits of their “2% Shareholders” correctly on their W-2?
November 25, 2014
A more than 2% shareholder during the tax year, as well as their spouse and lineal ascendants and descendants, are affected. If paid by the employer, the cost of Group-Term Life Insurance up to $50,000, as well as the premium costs of Accident and Health insurance, Short and Long-Term Disability and Long-Term Care insurance should be reported on the shareholder’s W-2 as income subject to federal tax. Furthermore, the S-Corp would deduct the additional compensation reported as compensation to their officers on their business return; and to the extent allowable, the shareholder would deduct the fringe benefit on their personal income tax return. Please contact your payroll reporting entity before the end of the year to be certain this information is being reported correctly on the W-2.