S Corp Shareholder Paid Health Ins Personally

[Scruice]

Have a question around timing of reimbursement to S Corp shareholder for health insurance premiums and amending W-2

Facts:

• Client is sole owner of an LLC with S Corp election.
• Client paid health insurance premiums personally and health insurance in his name. 
• Received W-2 salary and profit distribution from S Corp in 2021
• S Corporation did not reimburse him for health insurance premiums in 2021

Question and My Own Research

• Can the client in this circumstance have the S corp reimburse him now in 2022 for 2021 premiums paid and issue an amended W-2 so that he can take the self-employed health insurance deduction?

Notice 2008-1 states a medical plan is established by the S Corp and shareholder eligible for self-employed health insurance deduction if "the 2-percent shareholder makes the premium payments and furnishes proof of premium payment to the S corporation and then the S corporation reimburses
the 2-percent shareholder-employee for the premium payments in the current taxable
year." What I'm not clear on is whether "in the current taxable year" means reimbursement for the premiums paid in the current taxable year or the reimbursement for the premiums has to occur in the taxable year. In looking at accountable plan guidance, the reimbursement has to occur within 60 days - does that apply here?

Thanks

Steve

[TaxGuyBill]

I'm not aware of any solid rules on this, but in my opinion, I think the 60 day Accountable Plan rules should apply.  Again, just my opinion and not based on any direct guidance in regards to the health insurance.

[qbteachmt]

You are hoping to amend 2021 payroll?

Reimbursement in 2021, is payment in 2021. It isn't payment in 2020. And we're already over the 60-days, although there is no hard-and-fast "reasonable timeframe."

[Scruice]

Yes - it feels like a long shot, but since the IRS intends for a >2% shareholder to be able to deduct their health insurance premiums I'm just trying to see if there's any way to cross the t's and dot the i's after the fact to help them get the deduction. It seems the answer is no based on notice 2008-1 and the replies on this discussion so I'll just make sure he gets this set up right in 2022

[qbteachmt]

Have them catch up current year reimbursement and set it up for the S Corp to pay directly. That way, he won't overlook submitting timely.