You should first ask your CPA about how it is to be reported, once you know then we can guide you.  But typically it is two payroll calculations that are added to the owner annually to a payroll record in Dec.  One to add it and one to take it away since you are not actually paying it, the policy is.

I'd like to know the payroll calculations for the in and out.  Also, it is taxable and the policy is paying the taxes.

I may have misread your original request.  I thought you were talking about shareholder medical not life insurance dividends.  I searched the IRS.gov W-2 instructions and there is NO mention of reporting life insurance dividends on a W2.  Are you sure the life insurance company isn't going to send them a 1099?  But IF your CPA tells you they are reported the same, then you can set it up like this.

Thank you for your help!

Hold on, I was just informed that calculation will not work (although I was given it by a Sage tech support person years ago).  In order for it to be taxable we need two calculations.  I will send again.  Sorry for the inconvenience

Remember this is for 2% shareholder medical, but as long as your CPA says its the same, you can set it up this way.  Although the IRS says its only subject to to FIT & SIT which is why the first picture had only those two boxes checked.  

I haven't done anything with this yet, so thank you for letting me know about the change!

This is an example of it being non-taxable, so when you set up the deduct, you will need all the boxes on the top right checked.

This is an example of it being non-taxable, so when you set up the deduct, you will need all the boxes on the top right checked.