Health Insurance and S-corp stock attribution rules

Assume H(husband) is 100% owner of S-corp. W(wife) works for corp as w-2 employee. S(son) - not a minor- works for corp as w-2 employee. S is not an officer although I don't think that is relevant. Other employees as well.

Corp provides paid health insurance for employees. H covers other minor children through after tax payroll deduction. Family coverage is after tax payroll deduction for all employees.

According to attribution rules H, W, and S are all greater than 2% owners.

Am I correct that S must have health insurance added to his w-2 just like H?

If so, is S allowed to deduct the health insurance cost (that was added to his w-2) on line 29 of his 1040 just like H can do (remember than S only has constructive ownership not actual)? It would seem reasonable, but I wonder if it would cause an IRS letter since S would not have a Sch E or Sch C entity as part of his return.

Under above scenario, shouldn't H deduct cost of health insurance for both himself and W (corp pays for both and both are added to H's w-2 even though W is also an employee), on his(their- MFJ) 1040 line 29?

Since H's minor children are covered thru after tax payroll deduction, does this expense go to Sch A?

Reply to
CMS_VA_CPA
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I had this scenario myself a few years ago when my son and I thought he might be CPA material. When he started the second accounting course, he told me "I can't even understand page 1." At that point we both knew he would never be a CPA, so I let him go. But in the meantime, the attribution rules meant that he had to have the S Corp Insurance added to his W-2. I actually created a Schedule E entry even though he had no income other than W-2, so the software would handle the insurance properly.

I would think that even though family coverage is "after tax deduction" per company policy, the S Corp insurance rules would still govern, and so it would end up on the W-2 just as the primary coverage.

Reply to
Tom Healy CPA

Tom,

Thank you for your comments.

Charlie

Reply to
CMS_VA_CPA

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