coleboy Posted February 22, 2019 Posted February 22, 2019 We have a client that is an S Corp. Census information from payroll co. reflected a salary for the owner. Bookkeeper said that the salary reflected was wrong because it contained share holder insurance premiums. Plan uses W-2 income. Should these premiums be reflected in the the compensation for 401k purposes? This plan has a SHNEC.
justanotheradmin Posted February 22, 2019 Posted February 22, 2019 S-corp shareholder premiums are usually taxable, and reported as income on the W-2. What does the W-2 say? Are the premiums included? https://www.irs.gov/pub/irs-drop/n-08-01.pdf "The premium payments are included in wages for income tax withholding purposes on the shareholder-employee's Form W-2, Wage and Tax Statement, but are not wages subject to Social Security and Medicare taxes if the requirements for exclusion under section 3121(a)(2)(B) are satisfied." Unless the plan document excludes fringe benefits (which shareholder premiums usually are), they would be included as plan compensation. I'm a stranger on the internet. Nothing I write is tax or legal advice. I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?
austin3515 Posted February 25, 2019 Posted February 25, 2019 That;s what's nice about using the W-2 definition in the first place. Is it included in box 1? Yes? Then it's eligible comp. Austin Powers, CPA, QPA, ERPA
coleboy Posted February 25, 2019 Author Posted February 25, 2019 Thank you! I just needed some backup since the company's bookkeeper is bound to argue with me!
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