Podcast: Fringe Benefits and Form W-2

fringe benefits

Written by Jeff Dvorachek

January 6, 2022

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.

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Jeff Dvorachek
I joined Hawkins Ash CPAs in 1998. I am the partner-in-charge of the Manitowoc, WI, office and tax director for the firm. I have thorough experience providing tax services to individuals, commercial businesses, nonprofit entities and estates and trusts. I also provide compilation and review services. I lead the Tax Committee and am a member of the Information Technology Advisory Committee.

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