Message Font: Serif | Sans-Serif
 
No. of Recommendations: 3
FWIW... I called the IRS recently to get clarification on the phrase "established under business" because it threw me also. I thought because I had schedule C income and was self-employed for several months last year, I could claim the line 29 deduction for premiums paid during that time. The IRS person I spoke to said that what this means is that if your business goes away and the "plan" goes away too, then you can claim the deduction. Simply paying premiums out of pocket doesn't cut it with the IRS.

After speaking with the rep and some research on the net, I have come to following conclusions (other people correct me if I'm wrong):

- sole proprietors with schedule C income are screwed out of the deduction, unless they take active steps to setup a "plan" under their "business".

- a "plan" is not the same as an "insurance policy".

- one "plan" is to have the premiums paid by the business (better if the policy is issued to the business and paid by the business).

- or establish a company "plan" to reimburse the business owner for premiums.

- the "plan" should be in writing to defend it in case of audit.

- doesn't really matter if the company pays the premiums or the company reimburses the owner to take line 29 deduction.

- for s-corps, reimbursement to the owners is subject to federal tax withholding but not FICA, Medicare, and FUTA withholding, and is reported on W-2.

I found this link helpful on the IRS web site:

http://www.irs.gov/businesses/small/article/0,,id=107451,00.html

You should be able to itemize and deduct the premiums on sch. A, however.
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.