Paying Health Insurance Premium through Payroll Monthly for a 2% shareholder Scorp

Thanks for reaching out to the Community, IracemaC. I appreciate your detailed information.

The insurance you offer your 2% shareholders and the rest of your employees determines the tax treatment for S-corp insurance. It will also determine if you can set it up in your payroll product and how to do it.

If the 2% shareholders have identical medical insurance plans that are also offered to your other employees, the plan is subject to federal and state withholding. It's also exempt from Social Security, Medicare, and FUTA.

In the event your 2% shareholders have a different plan from other employees, or you 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.

You can learn more about this topic by checking out our Set up an S-corp medical payroll item for your corporate officers article.

I'll be here to help if there's any additional questions. Have an awesome day!

Thank you for your answer. There is no other employees just the shareholder. My question is when I run payroll and add the Health Insurance premium amount to additional pay types in payroll does QBOP automatically tax correctly the health insurance premium amount? I also need to call to set that up.

I appreciate your follow-up on Paying Health Insurance Premiums through Payroll, IracemaC. Let me share additional details.

In QuickBooks Online Payroll, when you add the health insurance premium amount in additional pay types, the system is expected to accurately calculate the taxes for the health insurance premium. QuickBooks Online (QBO) Payroll is equipped to manage different forms of compensation and should be capable of computing the correct taxes for health insurance premiums. However, it's always a good idea to double-check the settings and calculations to ensure accuracy. If you have any uncertainties, seek advice from a tax professional for further assistance.

You can also reach out to our Payroll Support team so they can help you in setting up the payroll item. They can be reached using your QuickBooks account. Here's how:
 

1. Go to the Help icon in the top right-hand corner.
2. Select Search, then press the Contact Us button.
3. Enter your question in the box and hit Continue.
4. Choose the best way you'll want to reach out to us.

Please check their availability to ensure you'll be addressed promptly. 

I'm also adding this resource that might be useful if you want to run payroll reports in QBO to help you track your business: Run payroll reports in QuickBooks Online Payroll. The same resources give you details on marking a report as a favorite and customizing and printing reports.

Please keep in touch if you have any additional S-corp medical item-related concerns. The Community team is always here to lend a hand. 

I believe that this is incorrect.  The IRS clearly indicates in Notice 2008-1 (https://www.irs.gov/irb/2008-02_IRB#NOT-2008-1) that health insurance premiums paid to or on behalf of a 2% shareholder are excluded from FICA taxes.  It is not dependent on whether the same insurance is offered to other employees, as long as the insurance is offered to all employees of the same class (e.g. >2% Shareholders). 

This has been a very frustrating issue for me with Quickbooks.  I just ran my W2s for 2023, and the insurance premiums are included in Box 1, but the Medicare and Social Security wages in Boxes 3 & 5 were not reduced by the amount of the premiums paid, which I believe is incorrect.  QB's article at https://quickbooks.intuit.com/learn-support/en-us/help-article/worker-benefits/set-corporation-medic... indicates that if you use the "SCorp Pd Med Premium" pay type, the FICA taxes will not incurred, but I am not sure that is happending.

I am experiencing this in real time.  I added the additional pay type but when added to our clients paycheck, it is calculating tax on this amount.  It sounds like QBO is not calculating it correctly.  It is almost better to do a W2c at the end of the year, and do it right.  I have spent several hours of precious time researching this topic.  qBO also does not let you edit the way the pay type is treated (ie taxable or non taxable pay or before or after taxes.) In QB Desktop each payroll item is fully editable. In QB Desktop you can correct this after 12/31.  

Hi there, @mdstrobel.

I see how challenging it is to prepare your W2s for 2023. Let me share some info and help you run your payroll with the correct amounts.

Some things affect the amounts in Boxes 1, 3, and 5 on your employee's W-2s. You may see the boxes have different amounts to each or are different compared to your employees' pay stubs and wonder if this is wrong. In some cases, different amounts are accurate.

Moreover, there are payroll situations and examples that can affect these boxes. These could also impact state tax amounts on the W-2. These are:

• Your employee has a pre-tax deduction, fringe benefit, or company contribution.
• Your employee earns tips.
• Your employee is exempt from one or more federal taxes.

To gain more understanding about these scenarios, check out this article: Understand why W-2 box amounts are different.

On top of that, before running a W-2s payroll for your employee, ensure to select the correct payroll item in your insurance premium. If you pick the incorrect one, you can call the QuickBooks Online (QBO) Payroll Care Team for adjustments.

Learn when and how to submit your W-2 and W-3 forms to Federal and state agencies through QuickBooks Online Payroll by reading this article: File your W-2 and W-3 forms.

If you have additional questions about managing your W-2s, feel free to reply to this post. I'll be willing to help. Have a good one.

Hi there Brian, This is not a reply to this topic at all.  The problem is that QBO's payroll module is calculating FICA taxes on SCorp Medical Premiums.  This is not a taxable amount.  QBO needs to fix this.  This is a QBO problem.  There is no solution available to the user because QBO has made it impossible to actually EDIT payroll items. In QB Desktop, you can edit how each item is taxed.  This is why I have so many clients on QB Desktop vs QBO.  QBO is so limiting and also in this case is calculating a very important amount incorrectly. 

Thanks for the prompt reply, Beth.

Let me add insights and route you to the best help.

Yes, you're right. In QuickBooks Online (QBO) Payroll, we don't have the option to edit how each item is taxed, unlike QuickBooks Desktop (QBDT) Payroll.

So, to make corrections and adjustments, we need to contact the QBO Payroll Corrections Team. 

Additionally, you might want to edit your employee paycheck. You can read this article: Edit, delete, or void employee paychecks.

For additional queries about payroll adjustments, don't hesitate to reply to this post. Keep safe and have a good one.

The issue is not that W-2 Boxes 1, 3, and 5 contain different numbers.  The issue is that they all contain the same values.  Boxes 3 and 5 should be less than Box 1 due to the company payment of 2% Shareholder Owner health insurance premiums.  So the W-2 is now transmitting that the health insurance premiums are in fact FICA taxable, when they should not be FICA taxable.  We can manually modify the values directly in the W-2, but I'm trying to figure out why QB Desktop is not calculating the values correctly.  We are using the SCorp Pd Med Premium pay type, and I have confirmed that the setup for this pay type does not have check marks next to the Medicare and Social Security tax items.

Bryan--Has this BUG with QBO Payroll been fixed yet? - David

Greetings, @bostonquick.

I understand the inconvenience this has caused to you and your business. However, I suggest that you get in touch with our Payroll Support team. This way, you will receive updates regarding the progress of the issue. Allow me to guide you through the process:

Contact them through your product.

QuickBooks Online Payroll Core - Monday to Friday, 6 AM to 6 PM PT.

QuickBooks Online Payroll Premium, Elite - any time, any day. Except for closed holidays: 4th of July, Thanksgiving Day, Christmas Day, New Year's Day

1. Sign in to your QuickBooks Online company.
2. Go to Help (?).
3. Select Contact Us.
4. Enter your concern, then select Let's Talk.
5. Choose a way to connect with us:

• Start a chat with a support expert.
• Get a call back from the next available expert.
• Ask the community to get help from businesses like yours.

You can also check this article for more details about payroll support and select the specific product to fill out the form to chat with an expert.

Additionally, here are some articles that you can read to help you learn how to run, print, and customize payroll reports also, when and how to submit your W-2 and W-3 forms to the Federal and state agencies through QuickBooks Online Payroll: 

• Run payroll reports.
• File your W-2 and W-3 forms.

Let me know by adding a comment below if you have more questions about W-2 boxes in QuickBooks Online Payroll. The Community is 24/7 available for your needs. Take care!