Form 7206 self employed health insurance for a more than 2% shareholder of an S-Corp line 11 is being limited to only box 5 Medicare wages, which I believe is incorrect. A more than 2% shareholder health insurance premiums are only reported in box 1 and 16 not in box 5. Because my shareholders are scaling back their W-2s were not much this year and the Form 7206 is not allowing the full deduction for the SE health insurance. Two questions - how are others getting around this limitation? My taxpayers are allowed the full deduction. Reading the instructions my taxpayers are not required to file Form 7206, but I do not see how to not file this report in Lacerte. How can I report the full SE health insurance deduction and not include the Form 7206?
Box 5 wages is the amount properly treated as equivalent to SE income for >2% S-corp shareholders.
@Shicks wrote:
is being limited to only box 5 Medicare wages, which I believe is incorrect.\
My taxpayers are allowed the full deduction.
The program is correct and it sounds like your clients are not allowed the full deduction. See IRC §162(l)(2)(A).
https://www.law.cornell.edu/uscode/text/26/162#l
A self-employed person is allowed to deduct SEHI "above-the-line" only to the extent of the self-employed earnings, .e., Sch C net income (less one-half of the SE tax).
To compare, an S corp shareholder has no SE income, so the equivalent is the EARNINGS from the S corp--meaning the wages.
The SEHI is included in Box 1 wages but NOT box 3 or 5(Medicare wages). If there are no wages other than SEHI, then the shareholder gets no deduction above-the-line.
You gotta have other wages in Box 5.
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