Set up benefits for S-Corp 2% shareholder-employees
For S-Corp or LLC companies, the IRS requires that health insurance premiums paid by the company to employees with a greater than 2% ownership be reported as wages (not pre-tax benefits). Learn more from the IRS.
To set this up for these 2% shareholder-employees:
- Click the People tab.
- Click on the employee's name.
- Under Benefits, click Add Benefit.
- Next to Select a Benefit, select "Create New Benefit" from the drop down menu.
- Enter a Benefit Name.
- Next to Benefit Type, select S-Corporation Owner's Medical Insurance, and enter the Company Contribution Per Pay Period.
- Click Save.
This applies to medical, dental and vision insurance.
Note: If you have benefits with Gusto, your 2% shareholder-employee settings will be managed internally.
Questions and Answers
Q: Why isn't there an employee contribution on my paystub?
A: 2% shareholders of S-Corps have their premiums paid by the company and no money is being deducted from you as an employee.
Q: How do I pay taxes on the premiums if they aren't being deducted from me?
A: The total premium amount is added to the owner's earning so that the income is taxed appropriately.