Health Insurance

This letter is to advise you of the tax benefits available to certain S corporation shareholders for health insurance costs.  Heath and accident insurance premiums paid on behalf of the more than 2% S corporation shareholders are included in the recipient’s Form W-2 as taxable wage income and the S corporation takes a compensation deduction.  The S corporation cannot take the deduction as a direct health insurance expense for the more than 2% shareholders.  These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. The additional compensation is included in Box 1 (Wages) of the Form W-2, issued to the shareholder, but would not be included in Boxes 3 and 5 of Form W-2.  Payments