PATH Act Tax Extensions Approved by Congress

The Protecting Americans from Tax Hikes (PATH) Act of 2015 was recently passed by both chambers of Congress, extending tax incentives that support both individuals and job creators. We highlighted some of the extensions that were awaiting approval in our most recent e-newsletter--please  click here  for details. Among the provisions are the enhanced Child Tax Credit, the enhanced American Opportunity Tax Credit, the enhanced Earned Income Tax Credit, the above-the-line deduction for teachers who buy school supplies and the charitable deduction of contributions of real property for conservation purposes along with the Research & Development Tax Credit and Section 179 expensing.

Medical Insurance Premiums Treated as Wages

 

Health insurance premiums paid on behalf of a greater than 2-percent S corporation shareholder are deductible by the corporation and reportable as wages on the shareholder's Form W-2. If you are a shareholder in an S corporation, own more than 2-percent of the stock, and the company pays your health insurance then you need to act.  The amount that the company paid on your behalf must be added to box 1 of the W-2.  The shareholder then receives an "above-the-line deduction" for the same amount on their personal return.

Fringe Benefits Included as Taxable Wages

Fringe benefits are defined as a form of pay for performance of services given by a company to its employees as a benefit and must be included in an employee's taxable wages unless specifically excluded by law. For example, a common fringe benefit is the value of personal use of a company car. This would be included as gross pay and the corresponding payroll taxes would be withheld from the employee's last paycheck.