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Hello!
my client is a sole member of LLC that is taxed as S-Corp. LLC does not provide group health insurance. there are only 4 employees total including sole member and his spouse. LLC makes monthly payments directly to insurance provider on behalf of sole member. this is an individual policy that covers sole member and his spouse and obtained through the marketplace. on LLC books, we classify these payments as non-deductible expense and do not report it on 1120S as deduction. is he then allowed to take a deduction on his 1040 or do the premiums need to be included in W2 box 1 before deduction is allowed?
thank you for your time answering this question.
This should be recorded as health insurance expense. However, at the end of the year, the premiums paid need to be included on the LLC member's W2. You have to follow the instruction to set up 2% owner health insurance. Add it the paycheck and deduct the same amount so that the add and deduct zero out. The LLC member can deduct the premium from their 1040 as self-employed health insurance.
interesting... so the bottom line is if health insurance premium is not included in Box 1 on W2, member can not take a deduction on 1040 regardless or who and how paid for the premium, is that correct?
when i add this amount to W2 Box 1, on LLC's books Wages Expense account would increase while Health Insurance Expense account would go down to $0 as deductions on member's payroll equal the amount paid for the premium. is that right?
could member also get reimbursed by the LLC for a stand alone premium he pays for his children's insurance? in Pennsylvania, kids can be covered by a more favorable state-provided insurance for free or at a reduced rate. member pays for this insurance out of pocket. can he request LLC to reimburse him, have this amount added to box 1 on W2 and take a deduction on 1040?
what about dental, vision or medicare supplemental insurance? would those qualify for 1040 deduction if all conditions are met?
thank you for your answer. i appreciate it.
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