Question: I have recently quit my job that provided health insurance to me and my family. My wife and I have a small business set up as an S-Corp where we draw a salary as employees of the company. There are additional business profits that reside in the business bank account and are not drawn as salary or as owner distribution. What do we consider when estimated our yearly income....only the salary and distributions that we take? Or the entire company net profit no matter where the funds reside? Thanks!
Answer: I assume your intention is to purchase individual health insurance through Covered California rather than group coverage through the SHOP. If so your family income is based on your Form 1040 adjusted gross income (AGI). S corporations and partnerships pass through the reporting of the company's entire profit to the shareholders or partners. You and your spouse are liable for taxes on the corporation's profit whether or not it was distributed. Those profits are included in your 1040 AGI.