Thank you for replying.  This is the heart of planning season, so I need to get clear and I'm refining how to talk with owners about this area of tax.

I don't understand why this is not known,

I think that the policy can be in the name of the business or not.

The owner might not make final insurance payments for insurance until late December.  These payments are made personally for insurance such as CMS, United Health or Delta Dental. These payments are not made from the business account.  Therefore, payroll can't be instructed until the final payment is made by the owner.

Here is the general guidance:

1. Health Insurance in Name of Business: According to IRS Notice 2008-1, the health insurance policy can be either in the name of the S Corporation or in the name of the shareholder-employee, as long as the S Corporation either directly pays the premiums or reimburses the shareholder-employee for the premiums and reports the premium payment or reimbursement as wages on Form W-2.

2. 2% Shareholder-Employee: In the case of a 2% shareholder-employee, the premiums paid for health insurance should be included in the employee's gross income but can be deducted by the individual on their personal income tax return. This is an "above-the-line" deduction under Section 162(l) of the Internal Revenue Code for self-employed individuals, which also applies to 2% shareholder-employees.

3. Payments for Personal Insurance: Payments for personal medical insurance policies could be included in wages and be deductible by the corporation, but it must also be included in the shareholder-employee's gross income. However, the individual may then be eligible for the self-employed health insurance deduction, subject to the limitations and qualifications under Section 162(l)