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S Corp Owners in Zenefits Payroll

An employee who is identified as S Corp owner in Zenefits and is paid through Zenefits Payroll will see an S-Corp Health and Disability (S Corp) income item in the Earnings section of their paystubs. This item combines the cost of any Medical, Dental, Vision, and/or Disability benefits (plus HSA contributions) for the owner into a single amount for the purposes of income tax calculations.

Medical + Dental + Vision (+ Disability) (+ HSA) = S Corp Income

Here's a step-by-step breakdown of an S Corp owner's paystub in Zenefits Payroll:

  1. Since the cost of the owner's benefits (the S-Corp Income item) is considered part of the owner's compensation, it's actually taxable income:
    Medical + Dental + Vision (+ Disability) (+ HSA) = S Corp Income
  2. This amount is combined with the owner's regular gross earnings for the period into their adjusted gross earnings:
    Gross Earnings + S Corp Income = Adjusted Gross Earnings
  3. Tax withholdings are calculated using the adjusted gross earnings:
    Adjusted Gross Earnings x Fed. Tax Rate = Federal Income Taxes Adjusted Gross Earnings x State Tax Rate = State Income Taxes
  4. However, the owner's Federal (income, FICA) and State taxes (income, other state tax) are subtracted from the original gross earnings, not the adjusted gross earnings:
    Gross Earnings - Employee Taxes = Net Pay
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