Health insurance can be an important part of how you compensate yourself as a business owner. Collective has partnered with Solo Health to offer nationwide PPO coverage built specifically for solopreneurs, with pricing that's typically lower than what you'd find on your state marketplace. Whether you sign up through Solo Health or bring your own plan, our team makes sure any deductible premiums are handled correctly in your payroll and bookkeeping.
Get covered through Solo Health
If you don't already have a plan, our partnership with Solo Health is the fastest way to get covered and have it set up correctly from day one. Solo Health offers plans with a $2,500, $5,000, or $10,000 deductible option, all on the Multiplan PHCS network, and Collective contributes a $100 annual credit toward your premium once you've been enrolled for four months.
Because Solo Health is our partner, signing up through Collective means we automatically set up your premium correctly on your payroll, the same setup described in the FAQ below, so you don't have to coordinate it separately with your onboarding accountant.
To get a quote, go to the Insurance tab in your Collective dashboard and select Health Insurance. You must sign up through the link in your dashboard to be eligible for the $100 credit. For the full rundown on coverage, tax treatment, and claims, see Collective's Partnership with Solo Health for Affordable Healthcare.
Why are we running insurance through payroll?
For reporting purposes, health insurance premiums (excluding COBRA premiums, which are covered separately below) paid on behalf of a greater than 2% S Corp shareholder-employee are deductible by the S Corp and reportable as wages on the shareholder-employee's Form W-2, subject to income tax withholding.
However, these additional wages are not subject to Social Security, Medicare (FICA), or Unemployment (FUTA) taxes if the payments of premiums are made to or on behalf of an employee under a plan or system that makes provision for all or a class of employees (or employees and their dependents). Therefore, the additional compensation is included in the shareholder-employee's Box 1 (Wages) of Form W-2, Wage and Tax Statement, but is not included in Boxes 3 and 5 of Form W-2.
The health insurance plan should be purchased from a government health insurance marketplace, through an insurance broker in the shareholder's name, or through a provider like Solo Health.
Can COBRA premiums qualify for the self-employed (SE) health insurance deduction?
Sometimes, but only if it's set up correctly through your S Corp's payroll. If your S Corp pays your COBRA premiums directly, or reimburses you promptly, and reports them on your W-2 the right way (as taxable wages in Box 1, but not Box 3 or 5), you can generally deduct that amount on your personal return.
A few things can limit this: you (or your spouse) can't also be eligible for coverage through another employer, your deduction can't exceed your W-2 wages from that S Corp, and you can't claim the ACA Premium Tax Credit for the same coverage.
Let us know as soon as you start paying or being reimbursed for COBRA premiums so we can report them correctly on your W-2.
Are premiums paid to a healthcare sharing ministry eligible for the self-employed (SE) health insurance deduction?
Unfortunately, the answer is no. The IRS has not traditionally considered healthcare sharing ministry plans to be equivalent to traditional health insurance, so premiums paid to one are not eligible for the SE health insurance deduction. In 2020, proposed regulations were introduced that would have treated healthcare sharing ministry plans similar to traditional health insurance, but they were never formally approved. These plans continue to be treated differently from traditional health insurance by the IRS. They are not eligible for the SE health insurance deduction, and premiums are not to be run in Gusto.
How do I set up my health insurance in Gusto?
If you signed up through Solo Health via Collective, this step is handled for you automatically. For any other plan, including COBRA coverage that meets the requirements above, we can help you add your health insurance premiums to your Gusto account as a benefit to be reflected in payroll.
How will I make my insurance payments?
You'll make the payments to your benefits provider from your business checking or credit card account. Gusto does not remit payment to third-party benefits providers, so make sure you make these payments yourself. Payments from your business checking or credit card should be applied to the Payroll Liabilities account in your accounting software.
How will my premiums be reported in my books?
The information in Gusto will be automatically synced to your Collective books. The Gusto entry will treat the premiums as an expense on your P&L and also an amount to be paid on your balance sheet (Payroll Liabilities). The payments of the premiums are then categorized as a Payroll Liability to zero out the balance due.
What if I have premiums paid that are not reported in Gusto?
Message us using the Message Center in the Dashboard, and your Accounting Advisor can help make any updates or corrections.
Have any other questions?
Chat with us via your Collective Dashboard and we're happy to help.
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as legal, financial, or tax advice. It is not intended to be a substitute for obtaining legal, accounting, or other financial advice from an appropriate and/or licensed adviser, or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.