How to set up HSA contribution for SCorp employee who is >2% shareholder of S-Corp? As per QB >2% shareholder of SCorp should not select 'Company HSA Contribution' option

[Aphylis]

Hello @ialam,

let me get you through in adding the 2% S-corp health insurance to your W-2 form.

You'll have to create to create the payroll item on you employee's profile for it to automatically reflect on your W-2 forms.

Here's how to set up an S-corporation pay type:

1. Go to Workers from the left menu.
2. Select Employees.
3. Select the employee's name.
4. Select edit (pencil) icon beside Pay.
5. In section 3, select the edit (pencil) icon.
6. Maximize Even more ways to pay employee, then select S-Corp Owner's Insurance.
7. Select Done.

Here's an article that will help you with details as well for adjustment if there are prior payrolls needs to correct:
Set up S-Corp Owner's Health Insurance.

Feel free to comment below

[ialam]

Thank you for your reply. Your response explains how to handle S-Corp owner's Health Insurance Premium in QBO but  it does not explain how to handle HSA contribution for >2% shareholder of S-Corp. 

[Anonymous]

Hi, @ialam.

I appreciate your response on this. Allow me to join the conversation and help share additional information about setting up HSA contribution.

In QuickBooks Online, you'll need to set up an S-Corp payroll item instead of HSA Contribution. For shareholder-employees who own 2% or more of an S Corporation, do not select Company HSA contribution. Your contributions are taxable at the federal level and in some states.

Let me route you these articles for more details.

Supported pay types and deductions explained

Company HSA contribution

Set up Health Savings Account (HSA) plans

We've recently updated our support experience in QuickBooks Online, so if you need further assistance please don't hesitate to reach out to us using the Contact Us link. Just click on this article for more information: Contact the QuickBooks Online Customer Support team.

I'm sure this will get you on the right track. Please don't hesitate to ask if you have additional questions about setting up HSA contribution for S-Corp employee. I'll be here to help however I can.

[ialam]

Thank you again for your response. Really appreciate it.

We are on the same page as you did mention "For shareholder-employees who own 2% or more of an S Corporation, do not select Company HSA contribution. Your contributions are taxable at the federal level and in some states".

However, you suggested to set up 'S Corp item instead of HSA Contribution'.Please suggest how to setup 'S Corp Item' to handle HSA contribution. In Quickbooks Online version, I do not see option to create 'S-Corp payroll item'.  

Thank you.

[ialam]

Ok. I think you are recommending to add 'S-Corp Owners Health Insurance' Item (pay type) and include HSA contribution in this Item.  If yes, them I think it will work but there will be just a single entry in W-2 box 14 for S-Corp Health Insurance Premium and HSA contribution. 

Appreciate any further comments.

[HoneyLynn_G]

Hello there, @ialam.

Thank you for getting back to us. 

I saw your original post in this thread. As mentioned, you'll only have to set up S Corp item instead of HSA Contribution. Please follow the steps and recommendations provided by my colleague.

Let me know if there's anything else you need or you have other payroll questions. I'm still here to offer my assistance. Have a good one!

[SeanS1]

Did you ever get an answer to @W2 box 14 question? How do you report the two (health insurance and HSA) separately?

[QueenC]

Hello there, @SeanS1.

Permit me to join the conversation to share some clarifications regarding S-Corp Health Insurance and HSA contribution.

As mentioned by my colleagues above, for shareholder-employees who own 2% or more, we need to set up an S-Corp payroll item instead of an HSA Contribution. With that being said, reporting the two separately can't be done. 

However, if it would be convenient for your business records to have S-Corp Health Insurance and HSA contributions recorded separately, I'd suggest speaking with your accountant first. This is to get help and guidance in managing these items. You can click here to find an accountant if you don't have one.

Additionally, if you need to track S-corp contributions, we'll need to run Payroll reports. Check out this article to know how to access these reports: Run payroll reports in QuickBooks Online Payroll.

For further assistance, don't hesitate to ping me in the comment section. I'm always willing to assist you further. Take care and have a great day!

[SeanS1]

I am an accountant and QBO Certified. Your answer doesn't help.

[ttran1]

I'm dealing with the same issue. Please share any solution to correctly set up the HSA contribution for S-corp 2% employee. Thanks.

[ttran1]

Hi, 

I'm having the same issue. Please share any solution to set up HSA contribution for S-corp 2% employee/shareholder to show correctly on payroll that reflects HSA as after tax (include in Box 1 of the W-2), but that it is not subject to Social Security (Box 3) or Medicare (Box 5). Thanks!

[JanbonN]

Hello there, @ttran1. I'm here to provide insights on setting up your HSA contribution for an S-corp employee who is a 2% shareholder in QuickBooks Online (QBO).

To begin, determine the insurance plan you offer to your 2% shareholders to know the tax treatment for S-corp insurance.

• If the 2% shareholders have the same medical insurance plan offered to all your other employees, the plan is subject to federal and state withholding. Exempt from Social Security, Medicare, and FUTA. 
• If the 2% shareholders have a different plan from other employees or don't offer an insurance plan to employees at all, the plan is fully taxable. This type of plan is only supported in QuickBooks Desktop Payroll.

Then, set up your S-corp medical insurance item.

1. Go to Payroll, then choose Employees.
2. Select your employee.
3. Navigate to the Pay types section, and select Start or Edit.
4. In Additional pay types, select S-corp Owners Health Insurance.
5. Enter an amount. Or leave it blank, then enter the amount as you run payroll.
6. Select Save.

Lastly, report the S-corp contribution on your paychecks. Run your payroll with an S-corp medical insurance item on it. You can include the S-corp contribution as you run your scheduled payroll, or create a fringe benefit paycheck.

Please refer to this article for a detailed explanation: Set up an S-corp medical payroll item for your corporate officers.

Additionally, you can also run a payroll report to get a closer look at your business' finances.

Let me know if you need further help with your payroll items. I'll be here to help you. Have a great day.