I am the bookkeeper for an S Corporation. The shareholder-owner for our company received an HSA that was paid for by the company. How do we and the owner report this transaction for tax purposes?

ANSWER

The BIDaWIZ Team's Answer:

Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are deductible by the S Corporation and included in the shareholder-employee's gross income. The shareholder-employee can also deduct the contribution made to the shareholder-employee's HSA. The shareholder-employee would report all contributions to the HSA on Form 8889 and file it with the Form 1040. The employer's contributions also will be shown in box 12 of Form W-2 with code W. In addition, report the HSA deduction on line 25 of Form 1040. This is referenced in IRS Publication 969 and IRC Section 223. Please note that whether or not the wages are subject to FICA depends on if there is a plan or fund in place in which the S Corporation pays the insurance company directly as per IRC Section 3121.