S Corp payroll co for single owner/employee?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
Topic Author
Cardio
Posts: 36
Joined: Wed Feb 10, 2010 11:42 pm

S Corp payroll co for single owner/employee?

Post by Cardio » Wed Jan 04, 2017 8:56 pm

I am the sole owner/employee of an S Corp trying to find a payroll company for my twice/year salary. I'm just looking for taxes, quarterly filing, and proper handling of 2% S Corp owner's health insurance and HSA payments.

Gusto/Zen payroll has been good, except they do not support S Corp owner's HSA contributions. I have to lump the S corp HSA contributions with health insurance payments. Then they have to file my W2 with incorrect numbers, then they manually correct it (which usually takes 3-4 phone calls and 5-10 emails, no exaggeration), then they file a corrected W2. The hassle factor is significant.

Paychex was grossly incompetent with inaccurate billing, incorrect tax payments and many other areas.

Intuit payroll does not support S corp owner's HSA, according to this link (see 2nd paragraph under Notes): https://payroll.intuit.com/support/kb/1003095.html

My CPA prefers not to do payroll.


Is there any other company that can handle my S Corp officer's payroll? Thanks for any suggestions!

Seekay
Posts: 53
Joined: Sat Dec 22, 2012 3:26 am

Re: S Corp payroll co for single owner/employee?

Post by Seekay » Wed Jan 04, 2017 9:51 pm

I don't have an answer for you except to say that I have an SCorp too, and decided I was too cheap (errr frugal) to pay for Paychex and the like.

1. I pay for health insurance from the business and at the end of the year, my CPA adds that to my "Salary" item within Quickbooks and enters it as a on the 1040 so that I get the deduction

2. I make HSA contributions 2x a year directly from my net pay and take a deduction for it

3. My CPA's assistant does set up my payroll taxes when I email them the months in which I take payroll (while trying to balance payroll vs net income). However, apart from whatever is needed at tax time, he really doesn't do anything for payroll as far as my HSA contributions or health insurance is concerned.

TylerS7
Posts: 81
Joined: Wed Dec 14, 2016 8:46 am

Re: S Corp payroll co for single owner/employee?

Post by TylerS7 » Wed Jan 04, 2017 11:31 pm

Acquiring a practice soon and will be set up as an S Corp. For what it's worth my CPA, with whom I have a very good relationship, suggested using MyPay Solutions. I haven't set them up yet, so I cannot give a great personal recommendation. Just another one to look into to see if they're a fit.

User avatar
Hayden
Posts: 1265
Joined: Tue Apr 16, 2013 5:13 pm

Re: S Corp payroll co for single owner/employee?

Post by Hayden » Wed Jan 04, 2017 11:33 pm

I do it myself. It's not that difficult, and I prefer it to the aggravation of correcting the errors made by Paychex (they made huge numbers of errors when they ran my company's payroll).
It sounds like you know what needs to be done; why not do it yourself?

User avatar
Sandi_k
Posts: 1158
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: S Corp payroll co for single owner/employee?

Post by Sandi_k » Fri Jan 06, 2017 3:40 am

We just moved from Paychex (which was charging ~ $100 for one check draw per month!) to Square (with whom my husband has a merchant account as well).

He is raving about the statements (clear and readable, instead of mysterious and impenetrable, like Paychex). Best of all, they are only charging $25 per month!

User avatar
Topic Author
Cardio
Posts: 36
Joined: Wed Feb 10, 2010 11:42 pm

Re: S Corp payroll co for single owner/employee?

Post by Cardio » Sat Jan 07, 2017 2:05 pm

Sandi_k wrote:We just moved from Paychex (which was charging ~ $100 for one check draw per month!) to Square (with whom my husband has a merchant account as well).

He is raving about the statements (clear and readable, instead of mysterious and impenetrable, like Paychex). Best of all, they are only charging $25 per month!
Sandi - Is your business an S corp? Do you know if Square supports 2% S corp owner's health insurance and HSA payments correctly (not included in Medicare/FICA salary)?

User avatar
Sandi_k
Posts: 1158
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: S Corp payroll co for single owner/employee?

Post by Sandi_k » Sat Jan 07, 2017 8:22 pm

Sandi_k wrote:We just moved from Paychex (which was charging ~ $100 for one check draw per month!) to Square (with whom my husband has a merchant account as well).

He is raving about the statements (clear and readable, instead of mysterious and impenetrable, like Paychex). Best of all, they are only charging $25 per month!
Cardio wrote:Sandi - Is your business an S corp?
Yes.
Cardio wrote:Do you know if Square supports 2% S corp owner's health insurance and HSA payments correctly (not included in Medicare/FICA salary)?
No, I don't know - my DH is covered under my health insurance, and thus he does not have an HSA. But I'm sure that that is merely something they program into the software, so I can't imagine it being an issue.

Spirit Rider
Posts: 12192
Joined: Fri Mar 02, 2007 2:39 pm

Re: S Corp payroll co for single owner/employee?

Post by Spirit Rider » Sat Jan 07, 2017 9:13 pm

Sandi_k wrote:No, I don't know - my DH is covered under my health insurance, and thus he does not have an HSA. But I'm sure that that is merely something they program into the software, so I can't imagine it being an issue.
You might think so, but the reality is far different. In fact, as evidenced by cardio, many payroll providers including the largest do not properly handle W-2s for HSA contributions.

Atgard
Posts: 420
Joined: Wed Apr 09, 2014 2:02 pm

Re: S Corp payroll co for single owner/employee?

Post by Atgard » Sat Jan 07, 2017 9:29 pm

I use Intuit Payroll as a single-member LLC taxed as S-Corp, and am able to report Employer HSA Contributions.

It shows up on my W-2 in Box 12(a) with note "W".

User avatar
Rob5TCP
Posts: 3408
Joined: Tue Jun 05, 2007 7:34 pm
Location: New York, NY

Re: S Corp payroll co for single owner/employee?

Post by Rob5TCP » Sat Jan 07, 2017 9:34 pm

I have a S Corp and I use a proprietary PR package to do my quarterly payroll. I make my HSA contribution at the end of the year and my accountant makes the adjustments on my year end taxes. The system produces all my quarterly reports and it takes me about an hour each quarter (or less) to file electronically. With my own software I can adjust my holding up/down depending on income outside my business.

nordsteve
Posts: 745
Joined: Sun Oct 05, 2008 9:23 am

Re: S Corp payroll co for single owner/employee?

Post by nordsteve » Sat Jan 07, 2017 9:44 pm

When I had a consulting business, I did quarterly payroll using numbers provided by my accountant. The whole process took about 15 minutes each payroll. I couldn't justify paying someone to do it for me.

User avatar
gasdoc
Posts: 1748
Joined: Mon Nov 03, 2014 8:26 am

Re: S Corp payroll co for single owner/employee?

Post by gasdoc » Sat Jan 07, 2017 10:28 pm

nordsteve wrote:When I had a consulting business, I did quarterly payroll using numbers provided by my accountant. The whole process took about 15 minutes each payroll. I couldn't justify paying someone to do it for me.

+1, except that I do mine monthly. Very easy. I write myself a check electronically as a transfer from my business account to my personal account.
Gasdoc

User avatar
Topic Author
Cardio
Posts: 36
Joined: Wed Feb 10, 2010 11:42 pm

Re: S Corp payroll co for single owner/employee?

Post by Cardio » Sat Jan 07, 2017 10:58 pm

Atgard wrote:I use Intuit Payroll as a single-member LLC taxed as S-Corp, and am able to report Employer HSA Contributions.

It shows up on my W-2 in Box 12(a) with note "W".
Atgard: I believe that S corp HSA contributions should be in W2 Box 14, not box 12 with code W. The latter makes the HSA contributions taxable for Medicare/FICA, which they are not. Ref:
http://www.taxresearchpro.com/blog/busi ... reholders/


To the others who do their own payroll, is it really so simple that it takes only a few minutes as some have described? When you take salary, you have to send money to the IRS, state tax, FUTA, SUTA, and file various forms. Do you handle all of that or does your accountant?

Miakis
Posts: 395
Joined: Sat Aug 16, 2014 6:40 pm

Re: S Corp payroll co for single owner/employee?

Post by Miakis » Sat Jan 07, 2017 11:26 pm

You could probably just post a job on Upwork and clearly indicate that you want an independent payroll provider who understands and has the capacity to do 2% shareholder health and HSA contributions. Even if they say they understand, you'd still want to review with them what it looks like and make sure it comes through ok.

My payroll program that comes with my professional tax software lets me do what you're asking and entering paychecks, drafting tax payments, filing quarterly reports, filing W-2s for a single-owner LLC with a couple of paychecks really is a 15 minute/quarter kind of deal. Tack on up to an hour to iron out fiddling with the software to make it look right.

danaht
Posts: 621
Joined: Sun Oct 18, 2015 11:28 am

Re: S Corp payroll co for single owner/employee?

Post by danaht » Sat Jan 07, 2017 11:53 pm

I think it might also be possible to use Intuit's Payroll service for this - with a minor adjustment to the W2 that Intuit generates.

Since the payroll tax treatment is the same for both scorp owner HSA contributions and scorp owner health insurance premiums - you could submit both the health insurance premiums + HSA contributions as "s-corp owner's health insurance premium payment". My guess is that all the payroll calculations, 940/941 forms will be generated correctly and can be submitted electronically as usual. The W2 Intuit creates would be incorrect because of the one amount that is in box 14 (you need this split into two amounts/ each with an appropriate description) . I think it might be possible to just not submit Intuit's generated W2 - but create your own W2 - and submit it online via the social security website. I hear it's very easy to submit a W2 on this website - it only takes 15 minutes. This is just a guess on my part of what could be done.
Last edited by danaht on Sat Jan 07, 2017 11:56 pm, edited 1 time in total.

GreenGrowTheDollars
Posts: 431
Joined: Fri Dec 18, 2015 11:09 pm

Re: S Corp payroll co for single owner/employee?

Post by GreenGrowTheDollars » Sat Jan 07, 2017 11:54 pm

Cardio wrote:
Atgard wrote:I use Intuit Payroll as a single-member LLC taxed as S-Corp, and am able to report Employer HSA Contributions.

It shows up on my W-2 in Box 12(a) with note "W".
Atgard: I believe that S corp HSA contributions should be in W2 Box 14, not box 12 with code W. The latter makes the HSA contributions taxable for Medicare/FICA, which they are not. Ref:
http://www.taxresearchpro.com/blog/busi ... reholders/


To the others who do their own payroll, is it really so simple that it takes only a few minutes as some have described? When you take salary, you have to send money to the IRS, state tax, FUTA, SUTA, and file various forms. Do you handle all of that or does your accountant?
Not if you work in California. :annoyed I'd pay a bunch for a payroll service before ever choosing to deal with California payroll filings again.

Spirit Rider
Posts: 12192
Joined: Fri Mar 02, 2007 2:39 pm

Re: S Corp payroll co for single owner/employee?

Post by Spirit Rider » Sun Jan 08, 2017 12:22 am

Cardio wrote:
Atgard wrote:I use Intuit Payroll as a single-member LLC taxed as S-Corp, and am able to report Employer HSA Contributions.

It shows up on my W-2 in Box 12(a) with note "W".
Atgard: I believe that S corp HSA contributions should be in W2 Box 14, not box 12 with code W. The latter makes the HSA contributions taxable for Medicare/FICA, which they are not. Ref:
http://www.taxresearchpro.com/blog/busi ... reholders/
The problem with W-2 Box 12 Code W is not that it causes the HSA contribution to be subject to FICA.

Like health insurance premiums, a S-Corp's 2% owner's HSA contributions uses a shell game to avoid FICA on the contributions:
  1. Take the S-Corp deduction of the HSA contribution on Form 1120S.
  2. Add the HSA contribution back into W-2 box 1 Wages, but not box 3 Social Security and box 5 Medicare. Report in box 14.
  3. Claim the Health Savings Account deduction on Form 1040.
Reporting an S-Corp' owner's HSA contribution in box 12 code W in combination with an HSA deduction is a double report of the contribution, which can cause an incorrect report of an excess contribution.

Atgard
Posts: 420
Joined: Wed Apr 09, 2014 2:02 pm

Re: S Corp payroll co for single owner/employee?

Post by Atgard » Sun Jan 08, 2017 3:09 am

Spirit Rider wrote:
Cardio wrote:
Atgard wrote:I use Intuit Payroll as a single-member LLC taxed as S-Corp, and am able to report Employer HSA Contributions.

It shows up on my W-2 in Box 12(a) with note "W".
Atgard: I believe that S corp HSA contributions should be in W2 Box 14, not box 12 with code W. The latter makes the HSA contributions taxable for Medicare/FICA, which they are not. Ref:
http://www.taxresearchpro.com/blog/busi ... reholders/
The problem with W-2 Box 12 Code W is not that it causes the HSA contribution to be subject to FICA.

Like health insurance premiums, a S-Corp's 2% owner's HSA contributions uses a shell game to avoid FICA on the contributions:
  1. Take the S-Corp deduction of the HSA contribution on Form 1120S.
  2. Add the HSA contribution back into W-2 box 1 Wages, but not box 3 Social Security and box 5 Medicare. Report in box 14.
  3. Claim the Health Savings Account deduction on Form 1040.
Reporting an S-Corp' owner's HSA contribution in box 12 code W in combination with an HSA deduction is a double report of the contribution, which can cause an incorrect report of an excess contribution.
So Intuit does this wrong? Is there a way to fix it? Or what would you recommend I do now? (I just cancelled the electronic submission of my W-2.) Is there a way to do it correctly in Intuit? I appreciate any advice, thanks...

User avatar
gasdoc
Posts: 1748
Joined: Mon Nov 03, 2014 8:26 am

Re: S Corp payroll co for single owner/employee?

Post by gasdoc » Sun Jan 08, 2017 9:42 am

Cardio wrote:
Atgard wrote:I use Intuit Payroll as a single-member LLC taxed as S-Corp, and am able to report Employer HSA Contributions.

It shows up on my W-2 in Box 12(a) with note "W".
Atgard: I believe that S corp HSA contributions should be in W2 Box 14, not box 12 with code W. The latter makes the HSA contributions taxable for Medicare/FICA, which they are not. Ref:
http://www.taxresearchpro.com/blog/busi ... reholders/


To the others who do their own payroll, is it really so simple that it takes only a few minutes as some have described? When you take salary, you have to send money to the IRS, state tax, FUTA, SUTA, and file various forms. Do you handle all of that or does your accountant?
It's really that simple. For me, there is no state withholding. Medicare, SS, and Fed withholding are all accomplished via one website (EFTPS). I plug in the amounts directly from the one page schedule my CPA gives me at the beginning of the year. The money is automatically taken electronically from my business checking account on the day I request. Then I go to my banking website and send a check from the business account to the personal account. Every three months, my CPA sends me various forms with the instructions , "sign, date and mail." Really quite easy, and no third party to screw things up.

Gasdoc

danaht
Posts: 621
Joined: Sun Oct 18, 2015 11:28 am

Re: S Corp payroll co for single owner/employee?

Post by danaht » Sun Jan 08, 2017 10:24 am

Spirit Rider wrote: ..
[*]Take the S-Corp deduction of the HSA contribution on Form 1120S.
..
.
Hi Spirit Rider,

I don't see a place on the 1120s - where you would specifically deduct a HSA contribution. Wouldn't this be included as part of the officer's compensation on line 7?

From 1120s instructions:
"Enter on line 7 the total compensation of
all officers paid or incurred in the trade
or business activities of the corporation.
The corporation determines who is an
officer under the laws of the state where
it is incorporated.
........
Include fringe benefit expenditures
made on behalf of officers and
employees owning more than 2% of the
corporation's stock. "

Spirit Rider
Posts: 12192
Joined: Fri Mar 02, 2007 2:39 pm

Re: S Corp payroll co for single owner/employee?

Post by Spirit Rider » Sun Jan 08, 2017 11:17 am

Yes, that is how a 2% S-Corp owner's fringe benefits are reported. This is why they are included in their W-2 box 1 wages. By being part of the compensation of the owner, they are still a deduction from the S-Corp's income. This is instead of using line 18 (Employee benefit programs) which is used for all < 2% employees.

They are included in compensation (W-2 Box 1 wages), but not Box 3 Social Security and Box 5 Medicare. That is how they avoid FICA.

Then the 2% owner takes the Health Savings Account deduction on their personal 1040.

Atgard
Posts: 420
Joined: Wed Apr 09, 2014 2:02 pm

Re: S Corp payroll co for single owner/employee?

Post by Atgard » Fri Jan 13, 2017 11:45 am

Spirit Rider wrote:Yes, that is how a 2% S-Corp owner's fringe benefits are reported. This is why they are included in their W-2 box 1 wages. By being part of the compensation of the owner, they are still a deduction from the S-Corp's income. This is instead of using line 18 (Employee benefit programs) which is used for all < 2% employees.

They are included in compensation (W-2 Box 1 wages), but not Box 3 Social Security and Box 5 Medicare. That is how they avoid FICA.

Then the 2% owner takes the Health Savings Account deduction on their personal 1040.
Do you know if there is a way to manually edit this through Intuit? Or would I need to prepare my own W-2 somehow to make that change for the HSA (from Box 12 code W, to Box 14)?

And if I send in Intuit's W-2, that would make the IRS think I contributed double the limit to my HSA?

Spirit Rider
Posts: 12192
Joined: Fri Mar 02, 2007 2:39 pm

Re: S Corp payroll co for single owner/employee?

Post by Spirit Rider » Fri Jan 13, 2017 12:09 pm

I haven't used Intuit Payroll in years and never did so as an S-Corp let along with an HSA. So I have no idea how you might do this in conjunction their software.

I recently saw a saw a link from somewhere where Intuit said they didn't handle this. However, one should be cautious about such links, because once on the net always on the net. It is entirely plausible this was an answer to a question from a previous tax year.

I think your best bet is to email to or chat with Intuit support to determine what the current 2016 tax year status is and what your options are. Who knows maybe miraculously this is all fixed.

techrover
Posts: 121
Joined: Tue Jun 12, 2012 2:23 pm

Re: S Corp payroll co for single owner/employee?

Post by techrover » Fri Jan 13, 2017 1:27 pm

I have recently gone through this myself for newly formed S-Corp - Med. Premium. I did not do HSA last year, but will do this year. I suggest if you know the tax implications of your salary/deductions and have PATIENCE, do it yourself as you will gain valuable insights (read below). In fact Intuit Payroll has a special payroll item for S-Corp Medical Premium which automatically does the right thing - only Fed/state withholding, no FICA.

Also there is a middle ground - there are small biz CPAs who specialize in payroll. Check on craigslist or referral from your bank/credit union. They would charge ~40-50$/mo. for one payroll. You will get personal service and not have to deal with learning new things.

I had the choice of going traditional route - hire CPA and Bookkeeper. I wanted to learn the "ropes" of accounting and mysterious "payroll" world, so decided to purchase Quickbooks Desktop and Intuit Enhanced Payroll. I spent some time learning Quickbooks - setting up Chart of Accounts, Payroll etc., then paid a CPA (found through upwork) to review my setup. This helped me learn quiet a bit about accounting and tax deductions - which in past I had to rely on tax advisors.
Then did annual payroll at Dec end. Again Intuit is far from perfect - unless you know the overall process, it can be confusing. However if you have your payroll setup correctly (tax mapping, expense accounts etc.), you can easily see what is happening. I turned off direct deposit and that allowed me to experiment various scenarios(salary vs distributions). This was invaluable to understand this whole FICA/Fed/State tax game. It took me some time, but knowledge gained was invaluable. I was then able to file some payroll returns as e-file, some manually. Same for tax payments.

This experience liberated me from the fear of IRS/state agencies as I figured out almost everything has a way to mitigate if you screw up. This I think was the most rewarding aspect of this exercise. If I had stayed with the traditional route of CPA/book-keeper, I still would fear a W-2 or 941 or ...

I felt I had to spend extra time in payroll process the first time I did it(you have to setup online enrollments for e-file, figure out correct tax mappings etc.), but next time onwards it should take less than hour and probably less then on. However I might as well outsource this setup now that I know what should happen.

techrover
Posts: 121
Joined: Tue Jun 12, 2012 2:23 pm

Re: S Corp payroll co for single owner/employee?

Post by techrover » Fri Jan 13, 2017 1:33 pm

Atgard wrote:
Spirit Rider wrote:Yes, that is how a 2% S-Corp owner's fringe benefits are reported. This is why they are included in their W-2 box 1 wages. By being part of the compensation of the owner, they are still a deduction from the S-Corp's income. This is instead of using line 18 (Employee benefit programs) which is used for all < 2% employees.

They are included in compensation (W-2 Box 1 wages), but not Box 3 Social Security and Box 5 Medicare. That is how they avoid FICA.

Then the 2% owner takes the Health Savings Account deduction on their personal 1040.
Do you know if there is a way to manually edit this through Intuit? Or would I need to prepare my own W-2 somehow to make that change for the HSA (from Box 12 code W, to Box 14)?

And if I send in Intuit's W-2, that would make the IRS think I contributed double the limit to my HSA?
There is a possibility of filing form for change to W-2 in Intuit Payroll software. So if your original W-2 was done in Intuit, it might be possible. You can try yourself or take Intuit's help. I found turning off direct deposit/e-file in Intuit Payroll worked best for me as it will not transmit any changes I make to Intuit. That way you can try out what you want to change, see if it generates correct amended w-2 and when everything looks fine, print forms manually or e-file.

Spirit Rider
Posts: 12192
Joined: Fri Mar 02, 2007 2:39 pm

Re: S Corp payroll co for single owner/employee?

Post by Spirit Rider » Fri Jan 13, 2017 1:45 pm

Note: If you can't e-file it with Intuit, there are plenty of places to e-file a W-2 < $5.

Atgard
Posts: 420
Joined: Wed Apr 09, 2014 2:02 pm

Re: S Corp payroll co for single owner/employee?

Post by Atgard » Fri Jan 13, 2017 2:32 pm

Thanks for the responses.

Intuit generated a W-2 that puts the HSA contribution in Box 12, code W. I had it generated by Intuit, but have not submitted it to the IRS yet, so can still make changes or submit one manually instead.

So the question I guess is (a) do I submit it as-is, will it be OK if reported in Box 12 or cause some problem, (b) can Intuit fix it (I guess I have to call/chat with them unless someone knows how to do it myself or has experience with this), or (c) file a W-2 myself through some 3rd party -- assuming the HSA should go in Box 14 instead of 12 I already have all the numbers to plug in. Thanks...

StrongMBS
Posts: 1
Joined: Sat Jan 14, 2017 2:38 pm

Re: S Corp payroll co for single owner/employee?

Post by StrongMBS » Sat Jan 14, 2017 8:34 pm

This is my first post although I have been a long-time reader of this forum. I have learned so much though the generosity of the members here and I thought it was time to give back.

A couple of years ago, I spent a lot of time understanding and setting up my business dealing with these issues.

As others, have pointed out. Assuming you have setup your insurance and HSA correctly, the problem is how to get health insurance premiums and HSA contribution reported in the right W2 box combination (Included in box 1 Wages and box 16 State Wages but not included in box 3 Social Security wages or box 5 Medicare wages and listed in box 14 Other). They are then 1040 “above the line deductions”, on line 25 (remember in Form 8889 you made the contribution not the company although it was thru the company – yes it is confusing) and line 29. This means they are subtracted from your wages – so they are in the end not taxed.

I have a S-corp and own more than 2%. I use Intuit Online Payroll so I am not sure how to get other payroll services to get this done but this is what I do and why.

Dealing with health insurance premiums is easy since in the Employees: Pay section there is a Pay type of “S-Corp Owners Health Insurance” which does the right W2 1/16/3/5/14 box combination.

In the Employees: Pay section the “Company HSA Contribution” pay type help window it is pointed out that this should not be used for a 2% shareholder-employee of an S-Corp. Unfortunately, it does not say what to do for 2% shareholders.

This is my solution. First, from my understanding, there are no set box 14 codes. It looks like that Intuit set the box 14 code for the “S-Corp Owners Health Insurance” pay type to a very generic “S Corp OW” (this is hard to read on the W2 Copy B but clear on the W2 Copy D).

So, I add my HSA to my insurance premiums and run them both thru the Pay Type “S-Corp Owners Health Insurance”. This causes the right W2 box combination where box 14 has the total of my premiums and HSA as one generic entry under “S Corp OW”.

This does cause my QuickBooks accounts to be messed up a little but I only add to my HSA account once a year and then I clean up the payroll download after the fact. Or you can just role both the insurance premiums and HSA contributions into one account like “SCorp2% Benefits” since they end up both included in line 7 on a 1120S.

By the way if you messed up by putting your HSA contribution under the wrong pay type you can call them and have them modify your W2. I had to do this when I went from a C-corp to a S-corp, they had to unwind some pay role. It might take a couple of calls so have patience and know what you want done.

I would not file a W2 with the HSA contribution in Box 12 code W if it should be in Box 14.

Spirit Rider
Posts: 12192
Joined: Fri Mar 02, 2007 2:39 pm

Re: S Corp payroll co for single owner/employee?

Post by Spirit Rider » Sat Jan 14, 2017 10:05 pm

Atgard wrote:Thanks for the responses.

Intuit generated a W-2 that puts the HSA contribution in Box 12, code W. I had it generated by Intuit, but have not submitted it to the IRS yet, so can still make changes or submit one manually instead.

So the question I guess is (a) do I submit it as-is, will it be OK if reported in Box 12 or cause some problem, (b) can Intuit fix it (I guess I have to call/chat with them unless someone knows how to do it myself or has experience with this), or (c) file a W-2 myself through some 3rd party -- assuming the HSA should go in Box 14 instead of 12 I already have all the numbers to plug in. Thanks...
Since a 2% S-Corp shareholder-employee ultimately claims the HSA contribution as a personal deduction on line 25 of their 1040, reporting it on the W-2 Box 12 Code W will cause a double reporting and appear to be an excess contribution of the full amount. I don't know if the IRS will catch this, but I wouldn't want to find out.

Atgard
Posts: 420
Joined: Wed Apr 09, 2014 2:02 pm

Re: S Corp payroll co for single owner/employee?

Post by Atgard » Tue Jan 17, 2017 6:28 pm

Thank you both for your help. I just spent about an hour on the phone with a nice CSR from Intuit Payroll to help sort it out.

As you say, it seems the correct behavior we want is inclusion in Boxes 1 and 14, but not boxes 3, 5, or 12.

Using the "HSA" box in Intuit does not include it in Box 1 or 14, and erroneously includes it in Box 12 (code W).

Like you said, to do that in Intuit, essentially we have to count it with S-Corp Owners Health Insurance Premiums (instead of HSA). To fix the issue, she had me run a new payroll for 12/31/16 that made a $6,750 S-Corp Owners Health Insurance payment. She then had their "back-end team" manually enter a correction for —$6,750 to zero out the HSA contribution.

That left it as you said with your work-around, with the combined total of my health insurance premiums and HSA contributed directly by the employer combined in Box 14, and nothing in Box 12.

Thanks again, hopefully that should do it! (Does that all look right?) And in future years, I would include it with health insurance premiums.

SGM
Posts: 3062
Joined: Wed Mar 23, 2011 4:46 am

Re: S Corp payroll co for single owner/employee?

Post by SGM » Wed Jan 18, 2017 4:10 am

When I had an S corp with 1 family employee, I did the payroll myself. My health insurance deductible was larger than the limits for contributing to HSA so that was not an issue, but it would have been put on the 1120s. I made monthly payments on line for fica taxes and that took no time at all. I did not withhold state taxes from the payroll. My tax software had all the requisite forms for quarterly reporting and W-2s. At the end of the year my CPA would review my work.

theplayer11
Posts: 972
Joined: Tue Jul 22, 2014 8:55 pm

Re: S Corp payroll co for single owner/employee?

Post by theplayer11 » Fri Jan 27, 2017 8:23 pm

danaht wrote:I think it might also be possible to use Intuit's Payroll service for this - with a minor adjustment to the W2 that Intuit generates.

Since the payroll tax treatment is the same for both scorp owner HSA contributions and scorp owner health insurance premiums - you could submit both the health insurance premiums + HSA contributions as "s-corp owner's health insurance premium payment". My guess is that all the payroll calculations, 940/941 forms will be generated correctly and can be submitted electronically as usual. The W2 Intuit creates would be incorrect because of the one amount that is in box 14 (you need this split into two amounts/ each with an appropriate description) . I think it might be possible to just not submit Intuit's generated W2 - but create your own W2 - and submit it online via the social security website. I hear it's very easy to submit a W2 on this website - it only takes 15 minutes. This is just a guess on my part of what could be done.
I think I have found the solution in Quickbooks..just Edit your current HSA payroll item,(right click on current HSA payroll item, or start a new one) after a few clicks you get to the "Tax tracking type" page. Just change the setting from HSA(taxable) to Scorp premium(same setting as your Scorp medicak Ins.) This will treat it exactly as your scorp health insurance premium....meaning increases wages in box 1 of W2, but not boxes 3, 5....and will report on line 14(Not line 12)

allesandre2014
Posts: 3
Joined: Mon Dec 31, 2018 2:25 pm

Re: S Corp payroll co for single owner/employee?

Post by allesandre2014 » Wed Aug 28, 2019 5:17 pm

I know this is an old post but is the HSA contribution added on top of wages on De9 and DE9c and then taxed for UI and SDI .

jacoavlu
Posts: 779
Joined: Sun Jan 06, 2013 12:06 pm

Re: S Corp payroll co for single owner/employee?

Post by jacoavlu » Wed Aug 28, 2019 7:50 pm

I’m also curious, does Gusto still not get S Corp 2% shareholders HSA contributions coded properly without a bunch of hassle?

furikake
Posts: 304
Joined: Tue Sep 08, 2015 10:13 am

Re: S Corp payroll co for single owner/employee?

Post by furikake » Wed Aug 28, 2019 9:18 pm

I thought HSA contribution was not a tax deductible item for S-corp owners, when did that become tax deductible?

Spirit Rider
Posts: 12192
Joined: Fri Mar 02, 2007 2:39 pm

Re: S Corp payroll co for single owner/employee?

Post by Spirit Rider » Wed Aug 28, 2019 10:35 pm

furikake wrote:
Wed Aug 28, 2019 9:18 pm
I thought HSA contribution was not a tax deductible item for S-corp owners, when did that become tax deductible?
Just like health insurance premiums, HSA contributions can not be deducted by the S-Corp itself, because pass-thru business owners can not receive pre-tax health and welfare benefits. However, just like health insurance premiums, HSA contributions can be run through the S-Corp to be exempt from FICA taxes by using the following procedure:
  • S-Corp 2% shareholder-employee health insurance premiums and/or HSA contributions are paid or reimbursed by the S-Corp.
  • The health insurance premiums and/or HSA contributions are included on Form 1120S Line 7 Officer compensation.
  • The health insurance premiums and/or HSA contributions are included on the S-Corp 2% shareholder-employee's W-2 Box 1 wages, but not Box 3 Social Security wages and Box 5 Medicare wages.
  • If the S-Corp 2% shareholder-employee meets the eligibility requirements they may deduct the health insurance premiums on their personal form 1040, Schedule 1, Line 29 Self-employed health insurance deduction. The S-Corp 2% shareholder-employee can always deduct the HSA contributions on their personal form 1040, Schedule 1, Line 25 HSA deduction.
Effectively the S-Corp 2% shareholder-employee receives health insurance premiums and/or HSA contributions as wages subject to income but not FICA taxes. Then they can claim the self-employed health insurance deduction and HSA deduction on their personal return.

This has been effective for health insurance premiums for decades. This has been effective for HSA contributions since IRS Notice 2005-8.

Atgard
Posts: 420
Joined: Wed Apr 09, 2014 2:02 pm

Re: S Corp payroll co for single owner/employee?

Post by Atgard » Thu Aug 29, 2019 7:05 am

Spirit Rider, thank you for all of the great info you provide on these forums. We are very lucky to have you here. :sharebeer

User avatar
Topic Author
Cardio
Posts: 36
Joined: Wed Feb 10, 2010 11:42 pm

Re: S Corp payroll co for single owner/employee?

Post by Cardio » Fri Aug 30, 2019 4:28 pm

jacoavlu wrote:
Wed Aug 28, 2019 7:50 pm
I’m also curious, does Gusto still not get S Corp 2% shareholders HSA contributions coded properly without a bunch of hassle?
OP here. Gusto now correctly handles the S Corp 2% shareholder HSA (and health ins) contributions. From a satisfied customer.

jacoavlu
Posts: 779
Joined: Sun Jan 06, 2013 12:06 pm

Re: S Corp payroll co for single owner/employee?

Post by jacoavlu » Fri Aug 30, 2019 4:45 pm

Cardio wrote:
Fri Aug 30, 2019 4:28 pm
jacoavlu wrote:
Wed Aug 28, 2019 7:50 pm
I’m also curious, does Gusto still not get S Corp 2% shareholders HSA contributions coded properly without a bunch of hassle?
OP here. Gusto now correctly handles the S Corp 2% shareholder HSA (and health ins) contributions. From a satisfied customer.
Thanks! That's helpful to hear.

Post Reply