S-corp medical insurance deduction

[deirmartin]

S-corp 50% owner has business pay his and his wife medical insurance.  It is not on his w-2 and posted on the books as a draw.

Wife is owner of a schedule C hair salon.  Can I enter this into sch. c self-employed health insurance and get an above the line deduction on the 1040?

[kathycpa1]

Yes as long as she has income of equal or greater amount than the health insurance premiums.

[IRonMaN]

For starters, S corps don't have draws.  How much was reported as officer wages for the year?

[deirmartin]

$74,000

[kathycpa1]

The deduction for helath insurance was not taken on the 1120S if it is listed as a distribution.(draw was used) The end result is exactly the same if you choose to amend the W2 and then amend the 1120S or add to the Schedule C.  

[qbteachmt]

Whoever prepared the 1120S did it wrong. And the amount of distribution for a 50% shareholder affects the other shareholder, so that is the second error.

Doing it properly allows the S Corp this as an expense (deduction). The reporting on the W2 makes it income to the shareholder, who then can include it in the SE business for expense.

All of which is what should be happening.