Article Date:
September 2019


Word Count:
1256

 

 

Q&A: No FICA on Health Insurance for the More-Than-2% Shareholder-Employee


Question

 

I am a partner in a CPA firm that has many S corporation clients.

 

Most of our S corporation clients have fewer than 50 employees, making them exempt from the Affordable Care Act.

 

My question concerns S corporations that pay for health insurance on the more-than-2-percent shareholder-employees but do not provide any health insurance to their rank-and-file employees.

 

We properly add the premiums to the more-than-2-percent shareholder-employee’s wages, making those wages subject to income taxation. But we do not make those wages subject to Social Security and Medicare taxes.

 

Some of my partners disagree with this treatment and believe that the wages are subject to Social Security and Medicare taxes.

 

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