The IRS allows S-corporations to pay for (and deduct) the medical expenses of their shareholders, but only under certain stipulations. First, the employee or owner must be a more-than-two-percent shareholder of the corporation. Second, the insurance premiums paid on behalf of (or reimbursed to) a shareholder-employee must be reported by the S- Corporation as wages on the shareholder-employee’s Form W-2. These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes….
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