S Corporation 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

2011 Year End Corporate and Non-Corporate Businesses

   We have reached that time of year when businesses need to consider year-end tax planning. This year is particularly challenging because Congress has enacted a series of tax breaks which are generally scheduled to expire after 2011. For example, unless Congress acts to extend these provisions, the following business tax breaks will generally expire (or become less beneficial) after 2011: 100% §168 bonus depreciation; larger and expanded §179 deduction; 100% gain exclusion for “qualified small business stock;” and relaxation of the S corporation built‑in gains tax rules. There have also been recent IRS releases and Court cases that address: the ability of self-employed individuals, partners, and S corporation shareholders to deduct health insurance premiums (including Medicare premiums); whether compensation