S Corp And Ordinary Income Vs. Seperately Stated Items

Question 1

Are retirement plan contributions for employees of S Corps included in ordinary income?

Answer 1

Yes. Retirement plan contributions for employees are included as a deduction in the ordinary Business Income calculation.

Question 2

Are retirement plan contributions for partners included as a deduction for ordinary Business Income of S Corps?

Answer 2

No. Retirement plan contributions for partners are included on schedule K of the partnership income tax return as a Seperately Stated item.

Question 3

Are fringe benefits, such as health care coverage paid by the S Corp to an a shareholder included in their gross income?

Answer 3

The value of fringe benefits such as health care of S Corp shareholders is included in gross income if the shareholder owns more than 2% of the S Corps stock (unless the s Corp doesn’t deduct the cost of such benefits).