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Set up an S-corp medical payroll item for your corporate officers

by Intuit•152• Updated 1 week ago

Learn how to set up and track S-corp medical contributions in Intuit QuickBooks Workforce and QuickBooks Desktop Payroll. S corporation medical insurance is a noncash fringe benefit provided to shareholders owning 2% or more of the corporation. You can set up an S-corp medical payroll item to report these benefits on employee paychecks and tax forms.

What are the insurance plan types for 2% shareholders?

The insurance plan you offer to your 2% shareholders and the rest of your employees determines the tax treatment and how you set it up in your payroll product.

  • Same medical plan: If 2% shareholders have the same plan as all other employees, the plan is subject to federal and state withholding but exempt from Social Security, Medicare, and FUTA.
  • Different medical plan: If 2% shareholders have a different plan or you don't offer a plan to employees at all, the plan is fully taxable. This plan type is only supported in QuickBooks Desktop Payroll.

For additional details on S-corp insurance, refer to IRS Notice 2008-1.

Set up S-corp medical insurance 

Follow these steps to set up S-corp medical insurance in Intuit QuickBooks Workforce or QuickBooks Desktop Payroll.

You can only set up the S-corp item for shareholders that have the same medical plan offered to all other employees.

  1. Go to All apps A bunch of numbers and letters on a tile wall., then Payroll, then Employees (Take me there).
  2. Select your employee, then select Job & pay.
  3. From Additional pay types, select Add.
  4. In the pay types â–Ľ dropdown, select S-Corp Owners Health Insurance.
  5. Add the recurring amount, effective start date, and effective end date if applicable.
  6. Select Save.

There are 2 tax tracking types for S-corp, both reporting in Box 14 of the employee’s W-2. Use SCorp Pd Med Premium for identical plans (taxable to withholding only) or Fringe Benefits for different plans (fully taxable).

Track S-corp items throughout the year

Use these steps if you track throughout the year or if shareholders have the same plan as employees and won't be paid for the rest of the year.

Step 1: Set up a Company Contribution payroll item

  1. Select Lists, then Payroll Item List.
  2. Select the Payroll Item dropdown, then New.
  3. Select Custom Setup, then Next.
  4. Select Company Contribution, then Next.
  5. Enter the item name and select Next.
  6. Select the agency and account number.
  7. Select the Liability account and Expense account.
  8. In the Tax Tracking Type window, select SCorp Pd Med Premium or Fringe Benefits and select Next until Finish.

Step 2: Add the item to the employee profile

  1. Select Employees, then Employee Center.
  2. Double-click the employee name and select Payroll Info.
  3. In the Additions, Deductions, and Company Contributions section, add your S-corp item.
  4. Enter the Amount per paycheck and the limit for total annual premiums.
  5. Select OK.

Create a fringe benefit paycheck in Intuit QuickBooks Workforce

  1. Go to All apps A bunch of numbers and letters on a tile wall., then Payroll, then Employees (Take me there).
  2. From the Run payroll dropdown, select Fringe benefits only.
  3. Choose Yes, my business will pay the taxes or No, my employee will pay the taxes, then Continue.
  4. Select a Pay date.
  5. Select the employee and enter the S-corp amount.
  6. Preview and submit payroll.

Create a zero net paycheck in QuickBooks Desktop Payroll

Use this if shareholders have a different plan than employees and won't be paid the rest of the calendar year.

  1. Create an unscheduled payroll and select Open Paycheck Detail.
  2. Remove any earnings items.
  3. Under Other Payroll Items, select S-Corp Adjustment and enter 0.01.
  4. Select S-Corp company contribution and enter the total premiums paid.
  5. Select S-Corp Adjustment again and enter -0.01.
  6. Select Employee Paid Tax Advance.
  7. Enter the total check amount in the employee summary box so the net amount is 0.00.
  8. Select Save & Close.
  9. Repeat these steps for any of your other shareholders if needed.
  10. If you use QuickBooks Desktop Payroll Assisted, send the check(s) to Intuit. 

What is an employee tax loan?

If an employee pays the taxes but there aren't enough wages to cover them, the system places an Employee Tax Loan on the check. This must be repaid by April 15 of the following year.

To edit the loan amount in QuickBooks Online:

  1. Go to All apps A bunch of numbers and letters on a tile wall., then Payroll, then Employees (Take me there).
  2. Select the employee, then Job & pay.
  3. From Deductions and contributions, select Edit next to Employee Tax Loan.
  4. Enter the Amount per paycheck and select Save.

Next steps

To see your history, learn how to Run payroll reports in QuickBooks Online Payroll and QuickBooks Desktop Payroll.

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