W-2 Reporting for S-Corp Shareholder Employees

Just a little reminder from Maloney and Kennedy, though we think you may already be on top of it…

If your S corporation pays health and accident insurance premiums on behalf of greater-than-two percent shareholder-employees, you will need to coordinate reporting these premiums for the shareholder-employees paid by the company onto the W-2 of each shareholder-employee. The S corporation reports the premium amounts as wages for income tax withholding purposes on the shareholder-employee’s Form W-2. However, these amounts are not subject to Social Security, Medicare or FUTA. Additionally, if applicable, you can reimburse shareholder-employees for Medicare premiums they paid. This will also be included on the W-2 like health insurance and is deductible by the individual.

A “greater-than-two-percent” shareholder-employee for this purpose is a person who owns, or is considered as owning under constructive ownership rules, more than two-percent of the outstanding stock of the S corporation or stock possessing more than two percent of the total combined voting power of all the corporation’s stock. Constructive Ownership means an implied ownership by means of a certain relative of a shareholder (i.e., parents, children, spouses).