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Greater than 2% S Corp Shareholder/Employee insurance handling is only available in the Professional Edition of Medlin Payroll Software.
•Instructions for proper payroll processing of Shareholder/Employee insurance is not something you can find in one simple document.
•There are certain facts, such the specific requirements for Federal withholding calculations, and requirements for certain states.
•We recommend you consult with a local payroll tax expert for an opinion, using your particular situation, making sure to specify you are asking about proper payroll processing of the Shareholder/Employee insurance.
•If your requirements cannot be accommodated by the available settings, let us know.
On the Employee Screen
•'This Employee Is a > 2% S Corp Shareholder'
•For any employee who is also a 2% or greater Shareholder of the S Corporation, check the 'This Employee Is a > 2% S Corp Shareholder' box.
•'Receives Corporation Paid/Reimbursed Insurance'
•For any Shareholder/Employee who receives Corporation paid or reimbursed insurance coverage, check the 'Receives Corporation Paid/Reimbursed Insurance' box.
•This may include health, accident, disability, worker's compensation, etc.
•'Taxable Insurance Amount per Paycheck'
•Adding a prorated amount to every paycheck.
•This is the safest method, and is what we suggest.
•Since the Shareholder/Employee receives the benefit of the insurance throughout the entire year, the insurance amount should be reported with each paycheck.
•It is up to you to use a method which is compliant for your tax localities.
•There are many opinions regarding when to include the amount in payroll.
•Once a Year
•Not suggested.
•On one paycheck per year, enter the insurance amount.
•'Constructive receipt' of the benefit is most likely every paycheck, since the Shareholder/Employee has the benefit of the insurance throughout the entire year.
•Once a Quarter
•Once a quarter, enter the annual amount of the premium(s), divided by four.
•This method might be acceptable, as long as the Corporation is allowed to deposit withheld taxes just once a quarter, and the Shareholder/Employee has enough earnings to cover the increased withholding.
•Once a Month
• Once a month, enter the annual amount of the premium(s), divided by twelve.
•This might be acceptable, as long as the Corporation is allowed to deposit withheld taxes just once a month, and the Shareholder/Employee has enough earnings to cover the increased withholding.
•NOTE
•Changing these settings does not go backwards and alter previously prepared checks or reports.
On the Paycheck Screen
•The Shareholder/Employee insurance amount for this paycheck is shown.
•You can edit the amount as needed.
•An 'even up' reminder will be shown, when you create the first Shareholder/Employee paycheck for March, June, September, and December.
•If you are including the insurance on a quarterly, monthly, or every paycheck basis, this is the time to make sure the reported amounts reflect the actual amount of the premiums - such as cases where the premium has changed since your last calculation.
Paycheck Calculations
•Gross Pay
•Shareholder/Employee insurance is added to Gross Pay (IRS Publication 15, and IRS Form W2 instructions).
•Department
•Shareholder/Employee insurance is added to the Shareholder/Employee's Department 1 earnings (Payroll Check Listing, Employee History, Worker's Compensation).
•Social Security
•Shareholder/Employee insurance is not included in Social Security calculations (IRS Publication 15, and IRS Form W2 instructions).
•Medicare
•Shareholder/Employee insurance is not included in Medicare calculations (IRS Publication 15, and IRS Form W2 instructions).
•Federal Income Tax Withholding
•Shareholder/Employee insurance is part of federal taxable wages, and is subject to withholding (IRS Publication 15).
•State Income Tax Withholding
•Shareholder/Employee insurance is added to state taxable wages, and is subject to withholding.
•CA SDI
•Shareholder/Employee insurance is excluded from SDI, ETT, and SUTA calculations (CA DE231TP).
•Hourly Calculations
•Shareholder/Employee insurance is not included.
•All Other Calculations
•Shareholder/Employee insurance is added to taxable wages, and is subject to withholding.
Employer Paid Taxes
•FUTA
•Shareholder/Employee insurance is not part of federal unemployment calculations (IRS Publication 15).
•If the Shareholder/Employee participates in their State Unemployment fund, special handling (manual preparation) of IRS Form 940 will be required.
•SUTA
•Shareholder/Employee insurance is not part of state unemployment calculations
•CA ETT
•Shareholder/Employee insurance is excluded from ETT calculations. (CA DE231TP)
•Hourly Calculations
•Shareholder/Employee insurance is not included.
•Other User Set Calculations
• Shareholder/Employee insurance is added to taxable wages.
Pay Stubs, Tax Forms and Reports
•Pay Stub
•Any Shareholder/Employee insurance is noted on the pay stub.
•Payroll Check Listing, Employee History
•Amounts which may include Shareholder/Employee insurance will have an asterisk.
•Shareholder/Employee insurance is shown separately, by department, at the end of the report.
•Payroll Ledger
•Amounts which may include which may include Shareholder/Employee insurance will have an asterisk.
•Payroll Tax Summary
•The Paychecks section will have an asterisk next to amounts which may include Shareholder/Employee insurance.
•FUTA
•Shareholder/Employee insurance is not subject to federal unemployment tax.
•SUTA
•Shareholder/Employee insurance is not subject to state unemployment tax.
•CA SDI, CA ETT
•Shareholder/Employee insurance is excluded from these calculations.
•Garnishment Report
•Shareholder/Employee insurance is included in pay.
•Custom Report
•Shareholder/Employee insurance is part of Gross Pay.
•Worker's Compensation Report
•Shareholder/Employee insurance is included in reported wages (Non-OT, Total Pay, and Regular Pay) for the Shareholder/Employee's Department 1.
• If the Shareholder/Employee does not participate in Worker's Compensation coverage, make certain to assign the Shareholder/Employee a unique department (OWNER1, OWNER2, etc), to make it easier to not include their wages in your WC insurance calculations.
•Quarterly Listing
•Includes Shareholder/Employee insurance in State Wages.
•Excludes Shareholder/Employee insurance from SUTA Wages.
•940
•Line 3 and Line 4 include Shareholder/Employee insurance.
•941
•Line 2 (Wages, tips, and other compensation) includes Shareholder/Employee Insurance, does not include Retirement contributions.
•Line 5a (Taxable Social Security wages) does not include Shareholder/Employee insurance.
•Line 5c (Taxable Medicare wages and tips) does not include Shareholder/Employee insurance.
•Line 5d (Taxable wages and tips subject to additional Medicare tax withholding) does not include Shareholder/Employee insurance.
•943
•Shareholder/Employee insurance is not part of Social Security or Medicare calculations.
•944
•Line 1 (Wages, tips, and other compensation) Shareholder/Insurance is included.
•Line 4a (Taxable Social Security wages) does not include Shareholder/Employee insurance.
•Line 4c (Taxable Medicare wages and tips) does not include Shareholder/Employee insurance.
•Line 4d (Taxable wages and tips subject to additional Medicare tax withholding) does not include Shareholder/Employee insurance.
•W2 / W3
•Box 1 (Wages, tips, and other compensation) - Shareholder/Employee insurance is included. Note, Retirement contributions are not included.
•Box 3 (Social Security wages), Box 5 (Medicare wages and tips) - Shareholder/Employee insurance is not part of Box 3 or Box 5.
•Box 14 (Other) W2 only - Shareholder Insurance is shown in Box 14.
•Box 16 (State Wages) - Includes Shareholder/Employee Insurance.
•Box 18 (Local Wages) - Includes Shareholder/Employee insurance (with one exception, CA SDI).