Discussion:Are blue shield insurance premiums deductible by me on my Schedule C?
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Discussion Forum Index --> Consumer Questions --> Are blue shield insurance premiums deductible by me on my Schedule C?
Abe i. schwartz (talk|edits) said: | 30 July 2006 |
| My spouse is my employee and I issue her a W-2 and she keeps time sheets, etc.
the only question I have is--Are blue shield insurance premiums deductible by me on my Schedule C?
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| 13 August 2006 | |
| As a self employed person it would be an adjustment to your gross income on the 1040 to the extent of your profit on Sch C. | |
Death&Taxes (talk|edits) said: | 13 August 2006 |
| If the spouse is a legitimate employee providing substantial services, and the health insurance is through the business and covers the emmployee-spouse, his or her husband and family members, the insurance would be deductible as a business expense on Schedule C. This was discussed in NCPE's Individual Tax Workshop book for 2004, which refers to Rev. Ruling 71-588. As Solomon notes, health insurance is a deduction to arrive at adjusted gross income, but the saving with Schedule C would be for Self-employment tax. | |
| 13 August 2006 | |
| As I read 71-588 there were three points it covered. First the propietor had an accident and health plan which called for reimbursement to all employees. Secondly, there were multiple employees - not just the wife. Finally, the reimbursement was not taxable to the employees and it could be deducted on Sch C. I do not believe the original post is analagous to this revenue ruling and therefore should be an adjustment to gross income rather than a Sch C deduction. | |
Mtmckeecpa (talk|edits) said: | 13 August 2006 |
| Abe,
My answer is yes they are deductible on the Schedule C IF, IF, the health policy is in the name of your spouse. And assuming that your spouse is a bona fide employee, etc... I rely on (CCA 200524001) to support the notion that the health insurance plan does not need to be in the name of the business. In addition to Rev Rule 71-588, see PLR 9409006. If your wife is your only employee, you may wish to consider a medical reimbursement plan too. | |
Death&Taxes (talk|edits) said: | 13 August 2006 |
| My answer was confusing; the policy should be in the employee name and cover her family. This was stated in the workbook but I left this out. I have had several clients who have done this, but others object to writing new insurance in a new name with new waiting periods etc etc etc. | |
| 14 August 2006 | |
| The PLR is not precedent. Read the Speltz case. I know this case had to do with Sec. 105 but the point is the extensive documentation pertaining to the spouse as an employee - not just my spouse helps me out with time cards and I give her a W-2. | |
Mtmckeecpa (talk|edits) said: | 14 August 2006 |
| Sol,
I have already read. That is why the employee needs to be "bona fide", arm's lenght. If Abe's spouse is on the payroll just to obtain the Sch C deduction then I agree, no deduction. But if a bona fide, arm's lenght employee then Sch C. I am reading Abe's statement that his wife maintains her own time card to track her time. | |
Death&Taxes (talk|edits) said: | 14 August 2006 |
| I agree, Sol; the one client I had no qualms about was a dentist whose wife wore green scrubs to help when needed, did his billing, bill paying, made his appointments, called to remind patients, greeted his patients, etc etc. It helped that the practice and her desk was in the basement of his suburban Colonial. There were only time cards for the dental assistant and the one or two other part time help he had. She had no employment contract but the situation passed an IRS field audit and an integral part of it was the familiarity his wife had with the business. She basically handled the audit using her hand written sheets she would give me every year thereafter. Her father, an ex-IRS man did their returns prior to me, but did not do the audit because of health. It was he who had set up the insurance situation, along with a 105 plan which was on paper. Maybe they were lucky on the audit, or maybe the respect the auditor had for her father played a role. I think sometimes that we, and many tax publications, spin advice without full warning of the consequences if not properly followed. That is why Abe should seek competent counsel from a nearby CPA, or Enrolled Agent. | |
| 14 August 2006 | |
| I agree DT. Don't think this one would fly. Regarding publications, one has to keep in mind they are sold to make money and at times they are spinning in my judgment. Case in point, in the discussion on capitalizing property taxes because person does not itemize (personal residence) one person said it is okay to do because The Taxbook said 1.266-1(b) applied - which in fact it does not. | |
