Tag: healthcare tax credit

Yes, I know.  Health insurance is very high and a drag on the small business.  So, lessen the pain by taking the healthcare credit if you qualify.  Here are the facts:

Starting in tax year 2011, you take the credit on Form 1040.

However, you must be one of the following to qualify:

• A self-employed individual with a net profit reported
  on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ
  (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit
  or Loss From Farming.
• A partner with net earnings from self-employment
  reported on Schedule K-1 (Form 1065), Partner’s Share of Income,
  Deductions, Credits, etc., box 14, code A.
• A shareholder owning more than 2 percent of the
  outstanding stock of an S corporation with wages from the corporation
  reported on Form W-2, Wage and Tax Statement.  This last situation catches clients off guard because they have to do an odd adjustment to their W-2.  Our bookkeepers work with clients to properly report their payroll.  If you did not properly include the health insurance in your W-2, then you should amend it.

The insurance plan must be established under your business.

• For self-employed individuals filing a Schedule C,
  C-EZ, or F, the policy can be either in the name of the business or in the
  name of the individual.
• For partners, the policy can be either in the name of
  the partnership or in the name of the partner. You can either pay the
  premiums yourself or your partnership can pay them and report the premium
  amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included
  in your gross income. However, if the policy is in your name and you pay
  the premiums yourself, the partnership must reimburse you and report the
  premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be
  included in your gross income. Otherwise, the insurance plan will not be
  considered to be established under your business.
• For more-than-2-percent shareholders, the policy can be
  either in the name of the S corporation or in the name of the shareholder.
  You can either pay the premiums yourself or your S corporation can pay
  them and report the premium amounts on Form W-2 as wages to be included in
  your gross income. However, if the policy is in your name and you pay the
  premiums yourself, the S corporation must reimburse you and report the
  premium amounts on Form W-2 as wages to be included in your gross income.
  Otherwise, the insurance plan will not be considered to be established
  under your business.

If this in confusing, speak to your CPA.  The deduction is too good to pass up.

IRS Source

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.