As the end of 2015 approaches, it is always a good idea to review the filing and reporting requirements for your company’s W-2s. The IRS requirements are constantly changing, so it is always good practice to consult with your CPA to make sure all new requirements are addressed.

One of the most common mistakes is the handling of insurance premiums related to shareholders of S-Corporations. If a greater than 2% shareholder in an S-Corporation has health or accident insurance premiums, these costs are reported as part of the shareholder’s/employee’s wages for the calendar year. These wages are not subject to FICA (Social Security & Medicare) or FUTA (Federal Unemployment) taxes. In other words, these wages are only considered “Box 1 Wages”. They will not show up in Box 3 or 5 subject to either of the FICA taxes. Also, the amounts in Box 1 attributable to insurance premiums are then broken out in Box 14 of the W-2.

The main benefit the shareholder/employee receives from reporting the insurance premiums on his or her W-2 is the option to take the health insurance premiums as a deduction to gross income on line 29 of page one of the shareholder’s 1040.

You can read more about this here: S Corporation Compensation and Medical Insurance Issues.

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