Joe Kristan has the details on an IRS update on the correct procedure for S Corporation’s 2% (or greater) owners’ health insurance:
“This new Notice is a slight liberalization of the rules. The IRS announced in 2006 that only premiums paid directly by the S corporation qualified for the tax break. The new rule expands the line 29 deduction to premiums paid by the shareholder but reimbursed by the corporation.”
Note that there are several ‘gotchas’ that must be followed; Joe details them.
If any clients have questions about this please call me as soon as possible so that we make sure your payroll service does the correct bookkeeping for your health insurance premiums.