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1099 MISC health insurance included in 1099 but paid by employer

helenlouise
Level 1

I have a client that received a 1099 MISC box 7.  Health insurance payments made by his employer were included in the 1099 MISC box 7.  1)  Are these amounts eligible for the medical insurance deduction for self employeds and 2) are these amounts subject to fica and medicare?

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8 Replies 8
qbteachmt
Level 15

You have to ask what this is. We have seen a number of questions on this forum where the employers are getting this Wrong.

For certain #2 won't apply, because you mixed Payroll taxes for that as compensation, which means it should have been on a W2, and most likely in one of the boxes.

And #1 won't apply, because you stated "paid by the employer" and an employer doesn't issue a 1099-Misc to an employee; they issue this to Independent Contractors.

So, the only other thing I can mindread would be that a Customer paid a Vendor's health insurance and is reporting it to the Vendor as if that is payment for services, in Box 7. In which case, your taxpayer is an independent contractor to that customer, there is no Employer relationship, and this simply is part of Compensation. Then, your taxpayer uses their Sched C and their 1040 and reports all of their business activity, because a 1099-Misc is for reference only, and has nothing to do with Actual Reportable income and expense from a business activity.

 

It would be helpful if can you give better facts and circumstances.

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helenlouise
Level 1

This person is self-employed and correctly received a 1099 MISC Line 7.  Health insurance premiums were retained by the employer to pay into a company health plan; they were properly included in line 7.  My questions are:1)  Are these insurance payments for health premiums eligible for the above the line health insurance deduction on the 1040? 2) Are they subject to FICA and M'CARE? I think they are on both counts, but am still posing the questions.  Thank you.

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BobKamman
Level 14

So is he self-employed, or is he employed by an employer, or maybe he used to have an employer who now pays his health insurance as a retiree, and he has gone on to working self-employed for someone else. 

Words matter.  "Employed" and "self-employed"  are usually not the same thing, unless you drive for Uber in California.  

helenlouise
Level 1

He is contracted by an insurance company and is a self-employed agent.

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qbteachmt
Level 15

"Health insurance premiums were retained by the employer to pay into a company health plan; they were properly included in line 7."

Then it's the same as if that person paid, but the employer streamlined by avoiding the back-and-forth for banking purposes.

So yes, this would be part of that person's 1040 and make sure to link that amount to their Sched C for SE health (not business health) and yes this is still part of Gross Compensation and subject to all taxes. It's no different than that person taking all of this home, then turning around and making their own payments for health insurance premiums, based on the details you have given.

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helenlouise
Level 1

 I am trying to document authority for claiming this as an above the line health insurance deduction for the contractor, and I agree that in reality the contractor is paying for this insurance since it is grossed up in the 1099 non employee compensation.  However, he did not "earn" this amount; I can trace all his commissions and this is simply an add on.  Thank you for your input.

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qbteachmt
Level 15

"since it is grossed up in the 1099 non employee compensation."

Grossed Up? Or, simply Added to the commissions as part of Taxable Compensation?

"However, he did not "earn" this amount;"

Based on what you describe, yes he did. He has a Gross pay but didn't get to touch some of it. That contract employer kept the funds and used it to pay that person's own premiums. If this person had a spousal plan, the "employer" would not have kept these funds, right?

"I can trace all his commissions and this is simply an add on."

Yes, "Add On" = Taxable Benefit. Additional amounts that are taxable to that agent.

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BobKamman
Level 14

Would have helped to know that in the first place.  It has been a while since I have had a client who was a "captive agent," but as I recall she received a year-end summary from the company that explained how the totals on several 1099's, including one for health insurance premiums paid on her behalf, matched actual deposits to her account and other credits.  

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