WAY Off Topic: some tax advice?

Question

Dang, I hate to do it, but youse guys are one of the best advice resources a body could have. I've kept up with tax laws regarding the self-employed for a couple of years now, but I've fallen behind in understanding of how new regulations affect the "permanently" employed. Now I'm mulling over taking a "direct" position with a small consulting company, but I'd still have to pay my own medical insurace premiums . . . at least for a while. If I contract with them I know I can continue to take a huge deduction for the premiums (premiums close to $12,000 per year for my family and me). But if I go direct I THINK the deduction disappears. Am I right?

Fiscally yours, 'Sporky'

Michael · Accepted Answer

I believe you're correct about the deduction going away if you're not "self-employed", but there are at least a couple work-arounds for it...

1) you (presumably) have a company... as long as you maintain the existence of that company, it can continue to pay your premiums. If the company had $15k in revenue, and $12k in insurance expenses, the IRS isn't going to care that your "salary" is nearly non-existent. They start to get antsy if you don't show a nominal profit tho. In short--a side job or two every once in a while would get you a big fat deduction. Assuming you had a reasonable amount of revenue already in '03, you are probably OK for the rest of the year....

2) the company you go to work for can offer a "Medical Reimbursement Account" (mine does). This allows you to designate an amount from your salary (on a yearly basis) that can be used, on a pre-tax basis, to pay medical expenses. There is also a child care variant on this. If this is available to you, you designate an amount equal to your expected premiums, and pay them with pre-tax dollars, which is functionally equivalent to getting a deduction.

Sporkman · Answer

Of course, of course, I realize you're right. Yeh, I have a company and it does show income so #1 is how I'll handle it. I should have realized. Thanks very much for the reply.

Best regards, Mark 'Sporky' Staplet>

Cliff Huprich · Answer

I strongly suggest this for one & all.

I doubt there is anyone posting or lurking here that will not recoup it's price very quickly. Often in minutes come tax time. But *plan* now. And then get next year's too when it comes out.

HTH

Cliff Huprich · Answer

Reword that to include only those that pay US income taxes .  Sorry.

Sporkman · Answer

Looks like a worthwhile read, Cliff.  Thank you (on behalf of all ofus).MarkCliff Huprich wrote:

WAY Off Topic: some tax advice?

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