Why is Pro Series not allowing an S Corp shareholder health insurance correctly reported on W-2 to flow to 1040 as a deduction when shareholder also receives a form 1095-A (with no premium tax Credit?) What is the way around is if any? If not, what should I suggest to do the next year to avoid this issue and being able to take the health insurance deduction?
This is governed by Revenue procedure 2014-41, and leads to an unfavorable taxpayer conclusion, where essentially the PTC which they do not end up being allowed to claim reduces their SEHI adjustment.
On the K-1 worksheet, there is a section about health insurance. Because of the 1095-A you DON'T enter the cost of insurance there, but you DO need to enter the Medicare Wages (Box 5 of the W-2) in that section of the K-1 worksheet. Did you do that?
OK, I see the SE health insurance deduction worksheet I can link to the K1 and the medicare wages you are referring to. So you are saying do not link 1095A to the S Corp but enter the amount there, correct? Or do not include 1095A at all?
On the K-1 worksheet, DON'T enter the cost of health insurance, BUT you NEED to enter Medicare Wages. That SHOULD trigger the 1095-A (that you already linked to the corporation) to give the Self Employed Health Insurance deduction.
For a S-corporation shareholder, the Self Employed Health Insurance deduction is limited to the person's regular wages from that corporation, which is Box 5 of the W-2 (for a Schedule C business the deduction is limited to the profit of the business). Until you fill that out, the program limits the deduction to $0 (zero wages equals zero deduction).
