entry for S corp owners health premiums

Thank you for posting here in the Community, @Peper.

Let me help you out with your confusion. I'll provide you with detailed information on the setup of an S-corp medical item and insights about payroll liabilities.

Depending on the plan you provide to your two percent shareholders and other employees, there are two tax tracking types for S-corps (from Step 1: Determine the plan your offer to your two percent shareholders). Both report in Box 14 of your employee's W-2.

To further understand S-corp medical payroll, you can read through this link: Set up an S-corp medical payroll item for your corporate officers.

Since you mentioned that it's now on Pay liabilities, it means the item was scheduled in Payroll setup (Change Payment Method) that shows what you owe on your agency for the S-corp, just like State and Federal taxes.

 The purpose of this is for tracking the liability payment in QuickBooks once paid in your agency.

For future reference, you can click this link if you want to successfully create and run payroll.

Please keep in touch with me here for any of your S-corp medical item-related concerns. I'm always here to lend a hand. Keep safe!

I thought I follwed the instructions for setting this up. It is a payroll item. under liabilty account I picked payroll liabilites (which is why it's showing up there) and under expense account I picked payroll expense (also showing up on that side).  I need both of those to go away but what would be the other side of the entry. The amount is showing up correctly on the W-2 for the owner but I need the liabilty and expense from this transaction to be deleted. How do I do this?

The company paid the premiuns all year and I just want to get the amount to add to wages of the owner.

Thanks

Welcome back to the thread, @Peper. I'd be glad to help you with your concern.
 

Beforehand, I'd like to know more about the details of your concern to get to the bottom of this issue and provide the right solution. When you said that you'd like to remove the amounts from the liability and expense accounts, is this because another agency is paying for them?

Any additional information would be a great help.
 

I'll be waiting for your response. Take care, and have a good one!

The company pays the premiums throughtout the year for the S crop owner. So at year end I need to get the amount we paid added to his wages for his W-2, that's the only thing that needs to be done with this transaction. What I set up did that but also added the expense and liabilty. So I guess I did something wrong. I set up a payroll item for S corp paid med premium but while I did this it asked for a liabilty and expense account. That is what is causing my problems but I don't know how to get around that?

I ran apayroll that included this along with personal auto use. So there was some earnings, the personal auto use, the health prem and the assocatied taxes with both. I gave the owner just enough earnings to pay the taxes. 

Thanks for adding info, @Peper. 

Let me help you out with this.

You can open the payroll item and edit the associated accounts.

Here's how:

1. Go to Lists.
2. Select Payroll Item List.
3. Find and double-click to open the information of the company contribution and deduction payroll item.
4. Click Next.
5. Review the expense and liability (company contribution) and liability (deduction) accounts of both payroll items.
6. Click Finish to confirm any changes you've made.

Additionally, I'd recommend consulting with your accountant in choosing an expense account. This way, we’ll ensure your accounts is well accounted for after you run your payroll.

If you don't have an accountant yet, you can have one. You can find an accountant near your place through this link: https://quickbooks.intuit.com/find-an-accountant/.

For complete details of tracking insurance premiums in QBDT, refer to this link: Record and allocate Prepaid Expenses.

Lastly, I've got you this helpful article for steps to resolve any instances that the payroll item is not calculated correctly as reflected on your employees' paycheck: QuickBooks Desktop calculates wages and/or payroll taxes incorrectly.

You can contact us anytime you have other concerns or questions about managing your payroll in QBDT. I’m just a post away from you. Keep safe and have a great day.

I don't beleive it should hit any expense or liabilty account. That's my problem. You have to pick one (when you set up the paroll item) and it shouldn't be any. Any accountants out there understand what I'm saying?

Company pays monthly prem. throughtout year.

At year end, I just want to get the prem total to show up on the owners W-2. By adding the payroll item it solved that but made me choose a libilty account and expense. I can make a journal entry to reverse the expense and liabilty but I think you shouldn't have to do that.

Hi there, Peper.

I appreciate you for getting back to us.

At this time, I'd recommend reaching out to your accountant so they can guide you on the best account to use. You can also visit our ProAdvisor page to look for one.

For future reference, you can click this link if you want to successfully create and run payroll.

We'll be right here if you have more questions.

Hi Peper,

I'm trying to do the same exact thing. To date all of the s-corp (for >2% officers) are booked to a regular expense account - "Health Insurance". In payroll settings I activated the S-Corp payroll item - which only lets you select a liability account. So, I have the total of the insurance, and need to get it on to the W-2 without creating a liability. This is where I don't see the mechanism to make this work. Did you find a solution?

Thank you.

@Peper @ToddPlager 

When you run S-corp >2% shareholder premiums through payroll, QB creates an expense and a liability, that's normal and appropriate.  The problem is if you are also creating the same expense when you enter or pay the health insurance premiums.  Are you recording the >2% shareholder premiums as an expense when you enter the bill from the health insurance company?  If so, then you have double-booked the expense by the amount sitting in the liability account.  To confirm this, run a Journal report (Reports > Journal (under 'For my accountant')).  Find the entries that were posted to the liability account and see what the debit entry is.  Is it health insurance expense?  And, are you also posting to that same account when you enter the bill from the health insurance company?  If so, you have double-booked the expense and will need to reduce your expenses by the same amount that's in the liability account.  To do that, create a journal entry: debit the liability account, and credit the health insurance expense account.  That will reduce the double-booked expense and zero out the liability account.

Hi Rain,

Thanks very much for the reply - very informative. As the tax accountant recommended booking the expense to the W-2 just once at the end of the year (last payroll period), I've been booking the monthly premiums to an expense account. I had thought to create a JE crediting the expense account and debiting the S-Corp Health Insurance liability account (that QB created when I activated that payroll item) - but I didn't know if the payroll item would debit/credit that account when I run payroll (I suppose that I could run payroll mid-period just to see and then void it).

So you're suggesting that I credit the expense and move that over to the S-Corp payroll item. Do I also need to create a different expense account for QB (the insurance should show up on the P&L as a payroll insurance expense, no?) to post the expense once I run payroll with the insurance amount included?

Thanks again - much appreciated!

-Todd

Thank you Thank you. Finally someone who understood my problem. Your the best rainflurry. That is exactly whats going on and I did do a journal entry to reverse the double booking. I didn't realize I had to report these as wages until a couple weeks ago.

So how do I do it right in 2023.

We pay our premiums monthly and do payroll bi-monthly.  There will also be times that the owner wouldn't be paid at all. I would like to do a year end entry to avoid the times that I may have to do a "zero payroll". Any suggestions.

Thanks

Hi Rain and Peper,

Yes - I forgot to mention the $0 payroll that results from booking the premium all at once in the last payroll period. Taxes don't seem to be affected - just payable wages. I'm guessing that we should compensate for that.

Thanks again!

@ToddPlager 

So you're suggesting that I credit the expense and move that over to the S-Corp payroll item.

Make a journal entry: credit the expense and debit the liability that's created when you book the expense when you run the last payroll of the year.  Make sure the liability account is $0 at year-end.

Do I also need to create a different expense account for QB (the insurance should show up on the P&L as a payroll insurance expense, no?) to post the expense once I run payroll with the insurance amount included?

Yes, it should be an expense on the P&L.  I believe QB creates its own S-corp >2% shareholder expense account when you run payroll the first time with the expense.  It will be different than the one you're using for the monthly premium payments but you should be able to start using that expense account when you make future monthly premium payments.

Hi Rain,

Great - I'm going to run a "test" payroll just to see how it shakes out. You've been so very helpful. Thanks again and have a happy holiday season.

Best,

Todd

@Peper 

So how do I do it right in 2023.

We pay our premiums monthly and do payroll bi-monthly. There will also be times that the owner wouldn't be paid at all. I would like to do a year end entry to avoid the times that I may have to do a "zero payroll". Any suggestions.

You can run the annual insurance expense through payroll on the last pay period.  Just make sure you stop running it through payroll throughout the year as you're currently doing.  After the last payroll is run with the annual expense, make the adjusting journal entry to reduce the double-booked expense (you booked the expense when you made the monthly payments to the health insurance company) and the corresponding liability amount - debit the payroll liability and credit the S-corp >2% shareholder expense.

Do you know if the portion that is the owners premium should be a payroll expense or just an operating expense on the P & L? 

Thanks

Hello, 

I use the s-corp 2% medical expenses as "Other Pay" when completing payroll in order for it to be placed on the W2 in the correct location.     Also, to reimburse myself as I pay it through the year and the corporation reimburses me via this payroll entry.

Question, should the dollar amount paid under the s-corp 2% be paid on the same check as the rest of the payroll or should it be paid using a separate check.

Hi there, @micah1054. I want to share some details about paying S-Corp.

You can pay the 2% S-Corp benefit on the same check as payroll or on a separate check. It is all up to you. I'd also recommend reaching out to your accountant about this. They know what's best for the company.

See these helpful guides on how to handle and keep track of S-corp contributions in QBO.

• Set up an S-corp medical payroll item for your corporate officers
• Run payroll reports in QuickBooks Online Payroll

Keep in touch if you need extra help with this or QuickBooks in particular. We're here to back you up 24/7. Stay safe and Happy holidays!

Hi! I came across this post when I was looking for info on how to deal with the liability balance created from adding the S-Corp Owners Health Insurance amount to the owner's payroll at year-end. I came across something that I thought might help.

First, the caveat is that I am using Quickbooks Online Payroll (as well as QuickBooks Online). So what I found may not apply on the Desktop side. At any rate, I could not figure out why QBOP was treating it as a liability. In mapping that pay item, all I had to choose from were liability accounts. I could not figure out where the "other side" of the entry was going - so I ran a transaction journal and found it. It was going to the payroll expense account that I had the owner's pay mapped to.

So, now all I have to do is complete a journal entry that debits the liability account and credits the wage expense account. That will cancel out the liability and cancel out the artificial increase in wages for the owner (their premium is paid as a part of the company's insurance premium).

I hope this answers the fundamental question - and don't feel bad - I went around and around with QBO Payroll "Support" for almost 90 minutes about this several days ago...

The payroll item set-up asks for a liability account but you can enter an expense account.  We use the same expense account for both line items, then no journal entry is needed.  It all depends on you wish to do your accounting.

Hi Dianna,

How do you change this S-corp insurance payroll item from a Liability account to an expense account? In the Payroll Accounting preferences for the S-corp Owners Health insurance, there's no other options in the Dropdown box besides the set Payroll Liabilities: S-corp Health Insurance?

For sure Dianna could know something I don't, I have only been using QBO & QBOP for two months. That said, when I used desktop I was able to set these payroll items to the expense directly and it worked beautifully. I have learned the hard way that QBOP does not allow this and what it wants is all payroll items set to a liability account and then you would pay any bills (health insurance, etc.) from the respective liability account. If you don't pay from the liability account then your only option, from what I know, is a journal entry. 

Hi All,

It looks like this question has been answered - I thought to revisit it with the exact steps that I use at year's end with the goal being to move the S-Corp officers health insurance premium to a W-2 and have it show on the Profit and Loss as an expense. I'm working in QB Online with QBO Payroll.

You may decide to set up the "S-Corp Health Insurance" payroll item first just so that it is ready when you need it. There are two steps to accomplish this:

1. Open the employee profile for the officer(s) in question, go to "pay types", and put a checkmark in the "S-Corp Owners Health Insurance" pay item (you will probably find this in the "common pay types" section). Click done and close out that screen.

2. Next you'll want to be sure that the pay type you just activated is properly mapped in payroll settings. To do that, click on the "Gear Icon" at the upper right of the screen and in the first column left, you'll see "payroll settings". Click on that and then scroll to the bottom of the page and find, "accounting". Click on the pencil icon at the right to open that set of options. Towards the bottom of that screen you'll see the S-Corp Health Insurance payroll item and to the right, the account (from your chart of accounts) to which it is mapped. In the past, QB only allowed that payroll item to be mapped to a liability account (and that's probably what you'll see there). If you prefer to map it to an expense account (which QB now allows), you may do so with the understanding that the JE (Journal Entry) you'll make at the end of these steps will be a bit different. I prefer the liability account, so after confirming the mapping (the payroll item is mapped to the "Payroll Liabilities: S-Corp Health Insurance" account, you can click done and close out that dialogue.

Because I am recording this to the W-2 only once per year, at year's end, the monthly health insurance monthly premium is recorded to the same liability account ("S-Corp Health Insurance Liability") detailed above. Each month, you'll see the "negative" amount in that account increase. When you're ready to move the amount out of that liability account (for me that's in December after the final premium for the year has posted to the bank account and I've run the final payroll), these are the steps that I take:

*Note: As the addition of the S-Corp Health Insurance amount will end up in a wage expense account, payroll typically increase the Federal Income Tax (FIT). If you don't want that increase (I don't), that's the reason for steps 1-3.

1. Run payroll without the S-Corp amount and check the FIT amount (note that amount).

2. Go back and add the S-Corp amount into the check (into the field specifically for that amount). This is the same amount that you'll see in the liability account.

3. Adjust FIT to match the normal payroll amount and run payroll.

4. At this point, if you check the liability account, it should be at $0.00.

5. The S-Corp amount will end up in wages and thus will show up on the W-2. You can run a PL or look at that account in the chart of accounts to verify.

5. Now, create a JE to move the S-Corp amount out of the Wages expense account and into the Officer Health Insurance expense account (if you haven't already created that account, do that first):

Debit (DR): Officer Health Insurance (the same amount that you entered on the check).

Credit (CR): Officer Wages (the same account in which the S-Corp amount ended up).

If more than one officer has health insurance premiums and you split up the total between their checks, be sure to use the total of the premiums (again the same amount that was in the liability account).

6. Lastly, run a Profit and Loss to check that the wages and health insurance expense are correct and that the liability account is at $0.00.

I hope this helps out - please reply back with any questions. Have a very Happy Holiday Season.

Todd, I just wanted to say thank you, thank you, thank you for taking the time to type out the steps you follow.  This is amazingly helpful to me as I have the exact same issue and didn't know the steps to complete what I needed to accomplish.  I located this support page and read through all the replies (still a bit confused) until I found your answer which made it click for me.