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@IRonMaN wrote:

Why would you withhold taxes on that since they get a deduction for self employed health insurance a little farther down the 1040?

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From an employer point of view, they are paying a taxable fringe benefit.  The employer doesn't know if the employee qualifies for the Self Employed Health Insurance deduction (such as being eligible for a spouse's subsidized employer insurance).  Even more so if the corporation has other shareholders that the tax preparer does not do the 1040, they don't know if the shareholder qualifies.

But as you are pointing out, if you are doing the 1040, it may be easier to just take the short-cut because you know what the end result is going to be.