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Intuit

Apply S Corp Medical at year end for corporate officers

Overview

S-Corp Medical health premiums increase taxable wages and tax deductions.

If your corporate officers elect to apply the health insurance to their wage base at the end of the calendar year, even though the company has been making premium payments throughout the year, in QuickBooks you can use paycheck to report the amount of S-Corp Medical benefits that you have paid for the year to your qualified shareholders.

By following these steps, you will be applying S-Corp Medical on a paycheck for a shareholder who will not receive any more wages this year. You will determine how to create the paychecks, based on how you set up the payroll item. Click the option below that applies to you.

Note: Before creating paycheck to report the S-Corp Medical, you must create the S Corp Medical company contribution payroll item based on the appropriate taxability. If you are unsure how the item should affect tax forms or its taxability, consult with your accountant/tax advisor for assistance.

If the plan is offered to all employees and you created a payroll item with a tax tracking type of SCorp Pd Med Premium

Create a paycheck for S-Corp with tax tracking of S-Corp Pd Med Premium and is taxable to Federal and State Income taxes only:

  1. Verify that you have created the S-Corp payroll item with tax tracking of S-corp Pd Med Premium.
  2. Create an Employee Adjustment for Federal Withholding and State Withholding.
    • Go to the Employees menu, then Payroll Taxes and Liabilities, and select Adjust Payroll Liabilities.
    • On the Date box, select December 31, 2019. This will be the same as Effective Date.
    • In the Adjustment is for: select Employee Adjustment, then choose the desired employee.
    • Under Item Name column, select Federal Withholding.
    • Under Wage Base column, enter the entire amount of the premiums paid for this officer.
    • Under the Amount Column, enter the calculated amount based from the Wage Base column.
    • On your next item, under Item Name column select State Withholding.
    • Under Wage Base column, enter the entire amount of the premiums paid for this officer.
    • Under the Amount Column, enter the calculated amount based from the Wage Base column.
    • Once completed, select OK. When prompted what expense account always select Payroll Expenses. Select OK.

    Note: For Assisted Payroll Only: you will need to send the paycheck you created to the payroll service. See How to send payroll.

    Important: Payroll items you used when creating these paychecks will show positive balances in your Payroll Liability report. If you have already paid the premium for S-Corp medical, and wish to zero out the balances showing as owed, you will need to do a company level liability adjustment. For instructions see Adjust payroll liabilities.

    If the 2% shareholders have a different plan from the other employees or do not offer the plan to their employees at all, and you created a payroll item with a tax tracking type of fringe benefits

    Create a paycheck for S-Corp with tax tracking of Fringe Benefit and is subject to all taxes:

    1. Verify that you have created the S-Corp payroll item with tax tracking of Fringe Benefit.
    2. Create a new Addition payroll item named S-Corp Adjustment with a Tax tracking type of Compensation. The account should remain Payroll Expenses.
    3. Create a second new Addition payroll item with a Tax tracking type of None. You can call it Employee Paid Tax Advance.
      • If you are creating a paycheck without any earnings item and using only a Company Contribution item with Tax Tracking of fringe Benefits, QuickBooks will calculate and deduct Employee paid taxes from the total amount, resulting in a negative net amount. QuickBooks will not create a paycheck with a negative net amount. To get around this, you can create an Advance Addition item then a tax tracking of None. You will use this item to cover the employee paid taxes calculated on paycheck so that the end result is a net amount of zero.*
    4. Create a new paycheck for the corporate officer and click Preview Paycheck.
    5. Remove any earnings item all other items (start with a blank paycheck).
    6. Under Other Payroll Items:
      1. Enter the S-Corp Adjustment payroll item created in Step 2, for the amount of .01.
      2. On the line below, add the S Corp Medical company contribution and the entire amount of the premiums paid for this officer.  QuickBooks will calculate the employee paid taxes and will post these amounts as negative.
      3. On the next line below, enter the S-Corp Adjustment payroll item again, this time for the amount of -.01.
      4. As your next item, enter the Employee Paid Tax Advance payroll item you created in Step 3.*  Next to this item, enter the total net Check amount from the paycheck.
    7. You should now have a paycheck with a net amount of zero.
    8. Create the paycheck.

Note: For Assisted Payroll Only: you will need to send the paycheck you created to the payroll service. See How to send payroll.

*Make sure that you recover from your employee the amount you are issuing as advance by April 30 of the following year, otherwise, you will have to report this as taxable compensation later on.

Important: Payroll items you used when creating these paychecks will show positive balances in your Payroll Liability report. If you have already paid the premium for S-Corp medical, and wish to zero out the balances showing as owed, you will need to do a company level liability adjustment. For instructions see Adjust payroll liabilities.

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