Tracking Fringe Benefits

By Jason Watson, CPA
Posted Friday, November 3, 2023

Before we go too far down the road, your business needs to track the amounts paid for fringe benefits so they may be included as Officer Compensation on Line 7 of your S Corp tax return and Box 1 of your W-2. Specifically-

• Self-employed health insurance premiums,

• Health Savings Account (HSA) contributions made by the business

• Health Reimbursement Arrangement (HRA) reimbursements, and

• Personal use of business assets such as automobiles and airplanes.

There are others, but these are the biggies. If you are using accounting software or even Excel, each of these should be a separate category. If you wanted to get fancy, you could have an account labeled “Officer Compensation” with sub-accounts being Wages, health insurance, HSA, HRA and Other.

In QuickBooks-ese, it would look like this-

Officer Compensation : Wages
Officer Compensation : Health Insurance
Officer Compensation : HSA
Officer Compensation : HRA
Officer Compensation : Other

At tax time, your profit and loss statement would then be framed and hung on our smart client wall. Yes, we have a not-so-smart client wall too which is thankfully much smaller since it is temporary until we give you the “see… how it works is…” tutoring during a Periodic Business Review.