Taxable Insurance Deduction

You can do almost anything but should you is the question

From the irs If an employer pays the cost of an accident or health insurance plan for his/her employees, including an employee’s spouse and dependents, the employer’s payments are not wages and are not subject to Social Security, Medicare, and FUTA taxes, or federal income tax withholding

Elsewhere: Premiums paid toward a Section 125 health plan are excluded from federal income tax, Social Security tax and Medicare tax. For example, you earn $1,300 biweekly and pay $100 total toward your pretax family health plan. You would subtract $100 from $1,300 to get $1,200, which would be subject to taxation.

So your CPA wants you to technically violate federal law, who are we to stand in his/her misguided way. It is all a matter of setup and instead of excluding the deduction of employee share of premium from all federal taxes, only exclude it from FICA and FUTA. Of course you are dealing with online payroll whose options are limited, you ,might not be able to customize the health insurance deduction as could someone using desktop versions. If you can it will be in payroll item setup - but I still would advise against changing something that is correct, albeit contrary to the wishes of your CPA. The lawyers for your affected employees would have a field day with the W2s with such an error

The business is a 1-man law firm.  The employee is the owner.  I am a contractor.  Does that make better sense?

It makes a little more sense but not enough to determine yet how it affects the lawyer employer/employee

What is the tax type entity of his firm? Subchapter S or full C corporation or an LLC/LLP electing tax treatment as a corporation? These are the only entities where he can be his own employee. I am guessing Sub-S in which case it is included in Box 1 of W2 as wages subject to FWT but exempt from FICA and FUTA 

https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...

Caveat: QBO only recognizes two scenarios regarding taxability for payroll deductions/contributions and neither fits this situation. You have to create a separate payroll item subject to FWT (and possibly your state/local - you will have to review) but exempt from FICA/FUTA https://community.intuit.com/articles/1770957-voluntary-deductions-in-online-payroll

and if the corporation pays it but to include it on W2 would be to add it as a taxable benefit and edit which taxes it is subject to.  https://community.intuit.com/articles/1763398-how-to-create-taxable-fringe-benefits-payroll-items

As the only employee of S-corp in some states the sole employee cannot have the corporation buy their insurance for them but the IRS ruled that the corporation can certainly reimburse the employee and include it on W2.

For this part of Rustler's comments: "What is the tax type entity of his firm? Subchapter S or full C corporation or an LLC/LLP electing tax treatment as a corporation? These are the only entities where he can be his own employee."

You would refer to the IRS regulations regarding the Business paying health insurance premiums for a more than 2% Shareholder, as well. Perhaps that is what is happening. Shareholder Medical Premiums are tracked as exempt for purposes of 940, as a Fringe Benefit value. It is seen in Box 1 of the W2 and reported in Line 14. Payroll already manages this when you select the specific type of Company Contribution item.

You have to follow the regulations for payroll management.