An officer/shareholder/employee is a greater than 2% shareholder in an S-corporation. In Box 1 of his W-2, health insurance is included which is not considered wages for Social Security and Medicare purposes. The S-corporation has a SEP. Is the correct wage to determine the shareholder’s SEP contribution based on: W-2's Box 1 (Wages, tips other compensation) or Box 5 (Medicare wages)?
Or is it Box 1 adjusted by subtracting the included health insurance premiums?
Comment: it seems more Simple to use Box 1 as is; however, it seems odd to allow a retirement contribution based on health insurance.
Your thoughts? And if you have a citation to authority, that would be appreciated.