Health Insurance paid for family members (even though not owners) of S Corp. must be included in family members W-2 as federal gross wages (and State gross wages). Health Insurance Plan must be a S Corp. health insurance plan. 

IRS Chief Counsel provided guidance on this in 201912001 dated 3-22-2019

I see some guidance in general in Pub. 15-A.

IRS Chief Counsel guidance indicates family member also get an adjusted gross income deduction for self-employed health insurance on form 1040.

Quick Books has mechanics in the payroll program to complete this process correctly.

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