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I
ialam
February 17, 2019
Question

In QBO, how to add HSA contribution of >2% S-Corp shareholder so that contribution is added to wages (W-2 box 1. FIT/SIT taxable but exempted from SS/FICA).

  • February 17, 2019
  • 5 replies
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5 replies

A
Anonymous
February 18, 2019

Hello ialam,

 

If you're adding an employee HSA contribution (a deduction item). Please follow the steps below:

  1. Go to the Workers tab and select Employees.
  2. Choose the employee and click on the pencil icon for Pay. 
  3. Click on the Add deductions link.
  4. Choose Deduction/Contribution. 
  5. Choose HSA plans from the Deduction/contribution type drop-down menu.
  6. Choose either Pretax HSA or Taxable HSA from the Type drop-down.
  7. Enter the description and choose % of gross pay from the Amount per pay period. 
  8. Click on OK.

QuickBooks will automatically calculate the HSA deduction on the employee's payroll. Also, these deductions will be reported in the box 12 of W-2 forms. But, this is excluded from federal wages (SS & Medicare) and most state wages. 

 

For more details, please check out this article: Set up Health Savings Account (HSA) Plans.

 

Otherwise, you'll need to add it as an additional pay item. This will be reported in the employee's total wages. To learn more about it, please see this article: S-Corp Owners Health Insurance.

 

We'll be glad to help if you need anything else.  

I
ialamAuthor
February 18, 2019

Thank you for your response. As per IRS, HSA Contribution for >2% shareholder of S-Corp must be included in federal/state wages and reported in W-2 box 1 but not in box 3 &5. As a result, this contribution will be taxable for federal/state income tax but exempted from Payroll taxes (SS/FICA/Medicare).

 

Also, HSA contribution for >2% shareholder of S-Corp should be reported in box 14 in W-2 and NOT in box 12.

 

In QBO, I do not see any 'Pay Type' that can help us to record HSA contribution for >2% shareholder of S-Corp correctly to meet IRS requirements.

 

Any help will be greatly appreciated.

    J
    JanyRoseB
    February 18, 2019

    Good day, @ialam.

     

    Thanks for reaching out to us. Let me help provide some additional information about Health Savings Account (HSA) contribution. 

     

    For shareholder-employees who own 2% or more of an S Corporation, do not select Company HSA contribution. Your contributions are taxable at the federal level and in some states. In this case, you'll need to set up S Corp item instead of HSA Contribution.

     

    Here's how to add the S-corp owners health insurance pay type for an employee:

    1. In the left navigation bar, click Employees. 
    2. Click the name of the employee you want to pay S-corp owners health insurance amount.
    3. Click Edit employee.
    4. Under How much do you pay this employee? click Add additional pay types if you haven't selected any other pay types, or click the pencil icon if you have.
    5. Select the S-Corp Owners Health Insurance checkbox. If the pay type is not in the Additional pay types list, click Even more ways to pay this employee to see more pay types, and select it from there. 
    6. Click Done.

    For additional reference, please check these articles:

    If you need further assistance with the steps from our live support, here's how you can contact them: 

    1. Sign in to your QuickBooks Online company.
    2. Select Help (question mark icon) at the top right.
    3. Click Contact us to connect with a live support agent.

    Don't hesitate to leave a comment below if you have any other questions. Have a good one. 

    Angelyn_T
    Angelyn_T
    February 18, 2019

    Thank you for getting back to us here in the Community, @ialam.

     

    Allow me to join the thread and help share additional information about setting up an S-Corp Owners Health Insurance in Quickbooks Online (QBO).

     

    The S-Corp item mentioned by my colleague JanyRoseB, is the S-Corp Owners Health Insurance that must be added to the pay type of the employee. The steps to add the S-Corp owners health insurance pay type was also provided above.

     

    For additional reference, you can also check this article: To add the S-corp owners health insurance pay type for an employee.

     

    Please know that I'm always here to help you if you have any other payroll concerns, just add a post/comment below. Wishing you the best!

    I
    ialamAuthor
    February 18, 2019

    Thank you again.

     

    Ok. So in this case, do you recommend adding S-Corp Owners Health Insurance Item and include HSA contribution in this Item?  If yes, then I think it will work for Tax calculation but there will be just a single entry in W-2 box 14 for S-Corp Health Insurance Premium and HSA contribution. 

     

    Appreciate any further comments.

      J
      JanyRoseB
      February 18, 2019

      Thanks for getting back to us, ialam.

       

      Let me guide you to the right support so you can get the help you need.

       

      To further assist you on setting up the S-Corp Owners Health Insurance Item and HSA contribution, I recommend calling our QuickBooks Online Payroll Support  Team. They have the tools to do a screen share so they can walk you through the process and ensure that the item will reported in box 14 in W-2.

       

      You can contact them by following the steps I provided on my first post.

       

      You're always welcome to post again if you have any other questions. Wishing you and your business continued success.

      MaryLandT
      MaryLandT
      December 16, 2019

      Let me clarify things out, vvicky72.

       

      As mentioned in this thread, you won't select the company HSA contribution for shareholder-employees who own 2% or more of an S corporation. This benefit is taxable at the federal level and in some states.

       

      You need to set up the S-Corp pay type on your employee and enter the amount from there. This will be reported on the W-2: Box 1 and $ amount in box 14 with “S CORP OWNER”.

       

      Let me show you how:

      1. Go to Workers from the left navigation bar, then choose Employees.
      2. Click the employee to open the profile.
      3. Go to the Employee details tab, then click the edit (pencil) icon beside Pay.
      4. Choose How much do you pay, then click + Add additional pay types.
      5. Click Even more ways to pay.
      6. Mark S-Corp Owners Health Insurance, and enter the amount.
      7. Select Done.

      After that, you can then run payroll that includes the S-Corp contributions.

       

      I've added this article for additional information: Set up and record S-Corp health insurance. it provides three ways to do enter this pay type in QuickBooks Online.

       

      Don't hesitate to get in touch with me here anytime you need a helping hand. I always have your back.

      V
      vvicky72
      December 16, 2019

      Thank you very much for your reply. I already use the "Scorp owners health insurance" for Insurance premiums paid by the scorp. How can I use the same section to show HSA contributions as well ?

        M
        mv32
        December 17, 2019

         

        Hi there, @vvicky72.

        Thank you for coming back to us in the Community.

         

        Since you don't have an option to click the +Add as mentioned on the steps provided by @MaryLandT, click on the Pencil icon on the 4th section, How much do you pay.



        There, you can now use the same section to show HSA contributions as well.

         

        Please follow the steps provided by my colleague.

        Should you have questions, leave a message for assistance. I'm always here to help you. Take care, and enjoy your day!

        S
        S-Corp
        July 1, 2022

        Is there any solution to this now?

         

        I know you can create a custom "pay type" but there doesn't appear to be any control over how this pay flows through the tax schedules and forms.  If we could create a custom pay type AND customize how it is taxed and where reported on tax forms, that'd be one solution.

         

        The other solution is for QBO to simply duplicate the code for pay type "Shareholder Insurance Premium" but call it Shareholder Company HSA contributions since it would flow through the tax code the same way (except maybe W-2 Box 14???, accountants?)

         

        Please create a solution to this issue.

          JenoP
          JenoP
          July 1, 2022

          Thanks for joining us in this thread. Allow me to give you details on how you can add an HSA contribution, S-Corp.

           

          As you may have read in the previous responses, we're unable to create a custom payroll type in QuickBooks Online. For now, you can follow the steps on how to create another Shareholder Insurance Premium type and name it as Shareholder Company HSA contributions. Here's how:

           

          1. Go to the Payroll menu, then proceed to the Employees tab.
          2. Select the employee and click the Pencil icon under the Employee Details section.
          3. Scroll down until you see Step 6 for Deductions & contributions.
          4. Choose Add deduction/contribution.
          5. From the ▼ dropdown menu, select HSA deductions.
          6. Enter a Description (appears on paycheck).
          7. Pick how you'd like to deduct the plan: Flat amount or percentage of gross. Then, type in the amount or percentage.
          8. Add an Annual maximum amount.
          9. When finished, select Save then Done.

           

           

           

          You'll also want to reach out to a tax adviser for more guidance about this matter. I'd like to share these articles that talks about setting up this type of payroll item in QBO:

           

           

          Customer feedback and suggestions are reviewed and considered whenever updates are designed. I recommend sending a feature request about being able to make a custom payroll items in QBO. Here's how:

           

          1. Go to the Gear icon and select Feedback.
          2. Type in your product suggestions and click Next.

           

          Let me know if that option works for you. You can also ask more questions in case you need more help when running payroll and working in QuickBooks as well. 

          M
          MyProEdge
          December 20, 2023

          I am also stumbling upon this post nearly 5 years later and the issue still does not seem to be fixed.  Absolutely inexcusable, Intuit!

           

          We set up a new firm HSA and need the special item for >2% shareholder HSA that is in W-2 Box 1 but not Boxes 3 & 5.  I can't believe that there isn't a programmer somewhere at Intuit that can do this.

           

          Here's a tip:  Stop working so hard on sending me an e-mail every 3 months telling me that all of your products are increasing in price by 30% and start making the product functional.  This simply needs to work.

            W
            whomts27
            February 23, 2024

            Has anyone found any workaround for this if you are using Quickbooks Payroll?  I spent over an hour with support trying to find options.  I was even considering just keeping track of the amount the entire year, then asking for a W-2 adjustment after the W-2s are created each year.  I was told that wouldn't be possible because they make paycheck modifications from the year to fix the issue so box 1 on the w-2 is correct.

             

            It looks like the only way to have a semi correct w-2 is to include the money in S Corp Health Insurance bucket since it will at least give me a w-2 that will have the correct taxes accounted for.  As a solo s corp member I will be able to keep track of what part of the S Corp Health Insurance money was for health insurance and which part was for the HSA contributions.  I could see this being a problematic approach if the w-2 was just mailed to other people at the company, but I don't have that problem.  Has anyone found a better way to handle this?

              W
              Widjet
              February 23, 2024

              Yeah, I did. Use Gusto. Light years better.

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