SELF-EMPLOYMENT TAX

Notice 2005–8, page 368. This notice states that a partnership’s contributions to a partner’s Health Savings Account (HSA) may be treated as distributions under section 731 of the Code or as guaranteed payments under section 707(c). HSA contributions treated as section 731 distributions are not deductible by the partnership, and may be deductible by the partner under sections 223(a) and 62(a)(19) and are excluded from net earnings from self-em

ployment. HSA contributions treated as guaranteed payments under section 707(c) derived from the partnership’s trade or business and for services rendered to the partnership may be deductible by the partnership, are included in the partner’s gross income, may be deductible by the partner under sections 223(a) and 62(a)(19), and are included in net earnings from self-employment. An S corporation’s contributions to 2-percent shareholder-employee’s HSA for services rendered to the S corporation are treated as section 707(c) guaranteed payments. For employment tax purposes, the 2-percent shareholder-employee is treated as an employee subject to FICA, unless the requirements of section 3121(a)(2)(B) are met.