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11737: 1120S - Shareholder Health Insurance

1120S S Corporation

How does Shareholder Health Insurance get reported on the K-1?


Amounts for an 1120-S should not be allocated to the shareholders in a manner different than the shareholder's percentage of ownership. This would create a second class of stock, thus nullifying the S-Corporation election.

Overrides entered on Schedule K-1 do not work because of the above statements and because there is no way to match the override descriptions on the K-1’s with the description on the Schedule K for the same line.

Less than 2% shareholder health insurance premiums are included with the expense for other employees as a deduction by the entity.

Shareholder health insurance premiums for a more than 2% owner are reported on the shareholder's W-2. The shareholder may be able to claim the Self-Employed Health Insurance Deduction on their 1040 return. Page 16 of the Instructions for Form 1120-S states:

"Report amounts paid for health insurance coverage for a more-than-2% shareholder (including that shareholder's spouse, dependents, and any children under age 27 who aren't dependents) as an information item in box 14 of that shareholder's Form W-2. A more-than-2% shareholder may be allowed to deduct such amounts on Schedule 1 (Form 1040), line 17. To find out if the shareholder can claim this deduction, see Self-Employed Health Insurance Deduction in chapter 6 of Pub. 535, Business Expenses."

In the 1040 return, more than 2% shareholder's health insurance will NOT flow anywhere from Form W-2. The amount reported as SEHI on box 14, along with the wages in box 5, should be entered on the SEHI screen to calculate the available Self-employed health insurance deduction.

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