If you own more than 2% of an S-Corp, it’s important that your health insurance premiums be correctly reported to
the IRS. The health insurance premiums should be included as taxable wages that are included in your W-2. [Box 1 (Wages) of Form W-2]. By adding the health insurance premiums as taxable wages, they will be subject to Federal and State income tax withholding. However, they are not subject to Social Security, Medicare (FICA), or Unemployment (FUTA) taxes. The amount of your health insurance premiums will be included in box 14 of your W-2. Handling your company-paid health insurance premiums this way ensures you can still take the premiums as a corporate deduction. Although your wages will be higher by the amount of the health insurance premiums, you can still subtract the premiums as an adjustment before your adjusted gross income.
If you are unclear on how this affects your particular situation please be in touch with your LLG contact.