Fringe Benefits Reminder
The end of 2021 is quickly approaching, and we want to remind you of a few fringe benefit reporting requirements.
As you get ready to process your fourth quarter payroll tax returns and prepare your 2021 Form W-2s, you may need to calculate taxable fringe benefits. These benefits should be added to wages for the year. Examples of a few of the more common benefits are personal tax preparation fees paid by the corporation or LLC, personal use of company car, and group term life insurance coverage over $50,000.
S Corporations have special rules for health insurance premiums and HSA contributions made on behalf of shareholders owning 2% or more of the stock. The premiums and the contributions are required to be included in taxable wages but they are not subject to Social Security or Medicare. The shareholders may be able to deduct 100% of the health insurance premiums and the HSA contributions on their personal income tax return for 2021.
Similarly for LLCs, health insurance premiums and HSA contributions paid on behalf of members are subject to income tax, but not self-employment tax. The members may be able to deduct 100% of the health insurance premiums and the HSA contributions on their personal income tax return for 2021.
Please remember that LLC members generally do not receive a W-2 reporting wages. Instead, most members are required to receive guaranteed payments. These are subject to self-employment tax on each member’s annual income tax return. Guaranteed payments are reported on each member’s Schedule K-1.
If you have any questions about fringe benefits, please call us at (616) 458-1835.