The year-end is just around the corner, so it’s time for some year-end tax and reporting issues for business owners, especially S Corporations.
Your payroll department or company has probably already provided you with an exhaustive multipage document that discusses every possible item that could be required on the W-2. Here are the most common items. S Corporation owners need to pay particular attention to Box 14 entries for health insurance and HSA’s.
Form W-2 Box 12:
Employer paid health insurance premiums for employees (code DD)
Employer paid contributions to HSA accounts for employees (code W)
Employee contributions to a 401(k) plan (code D)
Employee contributions to a 403(b) plan (code E)
Form W-2 Box 14
Box 14 is where S Corporation owners report their health insurance and HSA payments. A separate line item for each. There is a difference in how they are treated, as follows:
If the company has a group plan, health insurance premiums and HSA payments are added to Box 1 of the W-2. And, only Box 1. There is no net tax effect. They get added to your wages but deducted on your tax return.
If the company does not have a group plan, or you are reimbursed by the company, health insurance premiums and HSA payments get added to Box 1, 3 and 5. You end up paying social security and medicare tax, but get to deduct them on your tax return. FYI – the same treatment is required for employees who get reimbursed by the company for health insurance and HSA’s.
Be sure to provide this information to your payroll provider, so W-2s can be accurately prepared.
We hope you have a prosperous and healthy New Year!