There are certain benefits that owners of s-corporation get that need to reported as income and be included on the Form W-2 for the year. Today we will talk about some of them.
I have the list, so let’s start with the personal use of a company car.
- There are many situations where owners or even employees use a company owned car for their business activities. But this car is also available to use for non-business purposes.
- When someone uses a business assets for their own use, this is considered to be income to that individual.
- The IRS has a fair market value calculation in order to determine the amount of income to include.
- Once the calculation is done, this income in reported on the Form W-2 for income, Social Security and Medicare purposes.
What is group-term life insurance?
- An employer can pay for up to $50,000 of life insurance per employee tax free.
- But if the insurance is over $50,000, then the owner of an s-corporation or employee is required to pick up some income for the premiums paid.
- The IRS has a table to determine what the amount of the income is, but it is normally not that much.
- This amount is then reported on the Form W-2 and is subject to income, Social Security and Medicare taxes.
Health insurance for s-corporation owners.
- This is more of a reporting requirement.
- As an employee, any amounts paid for health insurance is a non-taxable fringe benefit, this includes owners of s-corporations.
- But as an owner of s-corporation, they need to report the health insurance premiums differently.
- They need to include the premiums as income on their Form W-2. Even though it is income, the s-corporation owner can later deduct these premiums on their individual return.
- So at the end of the day, the premiums are deductible, you just have to jump through a couple hoops top get it to be deductible.
- One word of caution here is that even though it ends up being deductible, the IRS can disallow the deduction if the premiums are not included on the Form W-2 so you want to make sure this is done before your
- W-2s go out.
Disability insurance for s-corporation owners.
- Disability insurance paid for by the company is income to the owner of an s-corporation
- These premiums are not deductible on the owner’s individual return.
- So essentially the premiums are made on an after-tax basis.
- This is actually good news because if the owner receives any disability payments, they will not be subject to tax.
Be sure to talk to a tax professional if you have any questions about fringe benefits and Form W-2.
As a partner, I have thorough experience providing tax services to individuals, privately held businesses, nonprofit entities and estates and trusts. I also provide compilation and review services.
