Health Insurance for Greater than 2% Shareholder of Sub S

Per IRS Notice 2008-1, Special Rules for Health Insurance Costs of 2-Percent Shareholder-Employees, health insurance must be included in the shareholder employee's 2008 Form W-2 in order to take the self-employed health insurance deduction for shareholder employees owning greater than two percent of the S Corporation.

The requirement existed in prior years but there was a work around... we could include the health insurance on the K-1. In either method the result tax wise is exactly the same... the W2 requirement adds no more revenue to the U.S. Treasury and it takes longer to prepare the year end payroll reports. BUT THAT IS THE REQUIREMENT NOW... if not on W2, no deduction!

There is more information about Sub S Corporations on our website