SE health insurance and the medical exemption
L1: SE health insurance and the medical exemptionClient took and early withdrawal from an IRA, but is getting relief from the penalty to the extent of deductible medical expenses on Sch A. If I move his SE health insurance completely to Sch A, his taxes decrease because all of the taxes are due to penalty and SE tax. Is this allowable, or am I required to deductthe amount allowableof the insurance expense on the 1040?2008-05-19 14:03, By: joanmcq, IP: [220.127.116.11]
L2: SE health insurance and the medical exemptionJoan:
Your question is totally off base for this site, which is dedicated to Substantially Equal Periodic Payment (SEPP) Plans under IRS Sections 72(t) and 72(q). You should be asking your question on a site dedicated to tax preparation and not SEPP Plans.
Based on your question about “… moving his SE health insurance completely to Sch A, …” I must conclude that your are venturing into an area that you should not be going because this question indicates that you do not understand tax preparation. Because of this, I will not answer your question and I suggest that others refrain likewise.Jim2008-05-19 14:38, By: Jim, IP: [18.104.22.168]
L2: SE health insurance and the medical exemptionI apologize if this site is not the correct place for such a question. I was directed to it by reading Mike”s question below on another board, and thought it was for 72(t) questions. And for your information, I am a CPA very well versed in tax preparation, but have come across an unusual situation and wanted some guidance. I resent your assumption otherwise.2008-05-19 15:42, By: joanmcq, IP: [22.214.171.124]
L2: SE health insurance and the medical exemptionI am a CPA also.Since this is not a list-serve for topics unrelated to SEPP 72-T, you can contact me at email@example.com or call me at 610-825-3366.
The wording of your posting is confusing to me. If he has Self-Employment Income, then he can deduct Self Employment Health Insurance PREMIUMS on page 1 of the 1040 to the extent of the lesser of the premiums or the income. The deduction on page one is not reduced by 7.5% of AGI, but if you deduct it with other Medical Expenses, it is subject to a 7.5% of AGI threshhold. You mention “deductible health insurance premiums on Sch. A, then mention taking them “completely on Sch. A, and then finally you ask if you are required to deduct the amount allowable on the 1040” ?
In any case, SE tax will not be reduced by these insurance premiums, unless his wife is his employee, in which case they can be deducted on Schedule C, thereby reducing SE Income, and SE Tax. The 10% penalty for early distributions are subject to the 10% penalty on those distributions, and the amount of SE Income and SE tax are not involved in that calculation. This is the only part of your posting that is related to this list-serve. Further, under certain circumstance, health insurance premiums ARE a valid exception to the 10% penalty, having nothing to do with SEPP 72-T, but these exceptions are covered in the same IRC area.2008-05-19 20:52, By: dlzallestaxes, IP: [126.96.36.199]