Adding S Corp 2% Health Insurance to wages in QB Desktop

Hi there, @dmcintire33. 

I'm happy to lend a hand with recording the 2% S Corp health insurance premiums. 

Since you're using QuickBooks Desktop, you'll need to create the payroll item and enter a liability adjustment to record the premium correctly. If you are a 2% shareholder and offer the same medical insurance plan to all your employees, follow these steps to set up the payroll item.

To create a payroll item:

1. Go to List at the top menu bar, and choose Payroll Item List.
2. Click on the drop-down for the Payroll item, and select New.
3. Choose Custom Setup, and click on Next.
4. Select Company Contribution, and tap on Next.
5. Enter a name, such as S-Corp Medical Insurance, and select Next.
6. Leave the fields as they are, and choose Next.
7. Click on the drop-down for Tax tracking type, and select SCorp Pd Med Premium.
8. Click on Next.
9. On the Taxes page, do not make any changes and click on Next.
10. In the Calculate based on quantity, leave the default set to Neither and click on Next.
11. In the Default rate and limit, leave the fields blank, then select Finish.

For more information about setting up the payroll item, click on this link: S-corporation medical payroll item.

Once done, you can perform a liability adjustment. This is to ensure the premium is reported on the W-2.

I also wanted to share a similar thread where users are helping each other with this same question. There is a lot of helpful information within it: https://quickbooks.intuit.com/learn-support/en-us/employees-and-payroll/how-to-add-s-corp-owner-s-he...

I'm here if you have any questions or concerns. Take care!

Thank you for your assistance.  I have followed the instructions provided, but when I go to run the W-2s, the additional amount does not show up as part of the State Wages.  It does show up as part of the Federal wages.  What am I doing wrong?

I appreciate you for coming back to the thread and adding extra clarification about your concern, dmcintire33. Let me discuss extra details on how W-2s and payroll item works in QuickBooks Desktop. Then, I'll ensure you'll be pointed to the right person to assist you further on this matter.

The information that appears on the W-2s is based on the payroll item you selected. Then, the taxes that are always affected on the payroll item are determined by the tax tracking type you've selected when the time you create the item. That said, adding S Corp 2% Health Insurance is subject to federal withholding. That is why the additional amount is not included in the State Wage. I've attached a screenshot below for visual reference.

On the other hand, you can consult your accountant to ask for additional help. They can provide you with complete details on how to properly handle the S Corp 2% Health Insurance so it'll post on the correct taxes.

Lastly, you may refer to this article to see various details about W-2 so you’re prepared for tax season and file this accurately: How to Understand and Fill Out a W2.

Always remember that you can always hit the Reply button anytime you have questions about the payroll forms or the payroll data in QuickBooks. I'm always here to help, dmcintire33. Have a great day ahead.

I need to create a payroll check that only records the 2% health insurance. I setup the payroll items as discussed earlier and created a check that just contains the 2% health insurance a message appears:

"Unable to create a paycheck when there are not earnings or additions items or the earning and additions are all zero. To create this paycheck first add an earnings or addition item with a non-zero amount". 

This shareholder is currently not taking compensation but does have 2% medical insurance that should be reported.

Thanks for taking the time to share your concern here in the Community, RJ-16.

Allow me to help you create a payroll check that records your shareholders' medical insurance items. To do this, we'll need to generate a zero net paycheck since your shareholders have a different plan than your other employees, and they won't receive payment for the remainder of the calendar year.

Here's how to do it:

1. Create an unscheduled payroll.
2. Click Open Paycheck Detail on your shareholder paycheck.
3. Remove any earnings items. 
4. From Other Payroll Items, pick S-Corp Adjustment under the item name. Enter the amount of 0.01.
5. In the next line, select the S-Corp company contribution item. Enter the total amount of the premiums paid.
6. In the following line, select the S-corp Adjustment item again. Enter the amount of -0.01.
7. In the next line, select the Employee Paid Tax Advance item. Enter the total check amount in the employee summary box. The net amount should now be 0.00.
8. Hit Save & Close.

For more detailed information, you can refer to this article: Set up an S-corp medical payroll item for your corporate officers.

If you need assistance running payroll summary reports in QuickBooks in the future, here's a helpful guide: Create a payroll summary report in QuickBooks.

Please feel free to add a comment below if you require further assistance with navigating QuickBooks Desktop Payroll. I'm here to provide any additional support you may need. Stay safe, and take care!

In this example, the state tax is checked, so why is this amount not included in the state wages?

Hi there, @lmiller1977.

Great question! When adding S Corp 2% Health Insurance to wages in QuickBooks Desktop (QBDT), the way the amount is reported for state wages depends on both the payroll item setup and state-specific tax rules. Let’s go over why this isn't included in the state wages despite the state tax being checked.

Why the amount isn't included in State Wages?

• An S corporation is a special tax structure where the company itself doesn't pay federal income tax. Instead, profits and losses pass through to the shareholders' personal tax returns.
• S Corp profits are not directly taxed at the company level. They are reported on the shareholders' tax returns.
• State wage primarily deals with income earned by employees, subject to standard payroll taxes. S Corp shareholder income is treated differently for tax purposes.

It's crucial to consult with a qualified tax professional or accountant to understand the specific tax implications of your situation. They can provide accurate guidance based on your circumstances and the applicable state and federal tax laws.

Moreover, you can also consider learning how to set up, change, or delete employee-paid payroll deductions in QuickBooks Desktop. Payroll isn’t just about paychecks anymore. Sometimes employees need to pay for things like health insurance, retirement contributions, uniforms, tools, or dues.

This appears to be a valuable challenge, but with the right adjustments, we'll ensure your state wages are accurate. Please don't hesitate to leave a reply if you have additional concerns besides S Corp Health Insurance.

Did you ever figure this out?