Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

IRS SPEAKS ON HSA CONTRIBUTIONS TO PARTNERS, S CORP SHAREHOLDERS

January 12, 2005

The IRS today issued Notice 2005-8, setting forth the treatment of HSA contributions by partnerships to partners and S corporations to shareholder-employees. In short:

· If made to partners as distributions, they are deductible HSA contributions by partner, not the partnership, and the contributions then have no effect on the partner's self-employment income.
· If made to partner as guaranteed payment: deductible by partnership, includible to partner, deductible by partner as HSA contribution, and subject to SE tax by the recipient partner.
· If made to 2% S corporation shareholder: Taxable wages, but not normally taxable for FICA, and deductible on shareholder 1040 as an HSA contribution.

As always, remember that limited liability companies are normally taxable as partnerships; "salary" payments to LLC members should be reported as guaranteed payments on the K-1, not as wages on a W-2.

      Bookmark: del.icio.us • Digg • reddit