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Another Independent Contractor question
Old 01-27-2016, 01:16 PM   #1
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Another Independent Contractor question

Sorry if this has been addressed before; I did a search though old threads but could't find my exact situation. I retired December 2014 and have truly enjoyed my first year of retirement (well, except for watching my portfolio struggle). About 2 weeks ago an opportunity presented itself through a former work colleague. The job is only 3 24-hour shifts a month, working as a forensic nurse examiner. The pay is a flat rate and only paid if a case comes in, otherwise it's $1.00 an hour to wait for a call. The pay is for the forensic exam, whether the exam takes an hour or 5 hours, with the pay coming from the state victims fund. All the nurses who work for this non-profit organization are IC's, and required to maintain licenses, certifications, and professional affiliations. The offer states the non-profit will pay the first year of malpractice insurance and certification.

I have always been a W2 employee and have zero knowledge about working as an IC, though I've read several threads on this forum that have been extremely helpful. I am aware there are several work related deductions allowed (car or mileage, scrubs, cell phone, conferences), but was unsure of healthcare premiums. DH and I have ACA insurance with a very small subsidy. Because we receive a subsidy, does that negate qualifying for healthcare tax deductions allowed for an IC? Honestly, I've spent hours trying to find some information, but have come up empty handed.

I don't expect to make a whole lot of money only working 3 days a month, though realize even a small amount of income could jeopardize our small subsidy.

Any advice would be appreciated - thanks!!

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Old 01-27-2016, 02:02 PM   #2
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I think you can deduct your health insurance, but only to the extent that you have a profit. So I think the impact of that limitation will simply mean that your part-time income will not be subject to tax (assuming that your ACA premiums will exceed your part-time income less other direct costs).

You may want to be careful though and see if your malpractice insurance (beyond the first year) will kill your income or make it not worth doing.

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Old 01-27-2016, 02:17 PM   #3
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Thank you, PB4uski. Our healthcare premiums, being our largest monthly bill, are the main reason I'm considering this part time endeavor. I thought if there was a way to write off some of the cost, 3 days a month would be worth it. I had not factored in the malpractice costs, so thank you for bringing that up.
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Old 01-27-2016, 02:28 PM   #4
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With the extra income, your ACA subsidy may be eliminated. If you have an S-Corp, I believe you can deduct your health care premiums.

Health and accident insurance premiums paid on behalf of a greater than 2-percent S corporation shareholder-employee are deductible by the S corporation and reportable as wages on the shareholder-employee’s Form W-2, subject to income tax withholding.

However, these additional wages are not subject to Social Security, or Medicare (FICA), or Unemployment (FUTA) taxes if the payments of premiums are made to or on behalf of an employee under a plan or system that makes provision for all or a class of employees (or employees and their dependents). Therefore, the additional compensation is included in the shareholder-employee’s Box 1 (Wages) of Form W-2, Wage and Tax Statement, but is not included in Boxes 3 and 5 of Form W-2.

A 2-percent shareholder-employee is eligible for an above-the-line deduction in arriving at Adjusted Gross Income (AGI) for amounts paid during the year for medical care premiums if the medical care coverage was established by the S corporation and the shareholder met the other self-employed medical insurance deduction requirements. If, however, the shareholder or the shareholder’s spouse was eligible to participate in any subsidized health care plan, then the shareholder is not entitled to the above-the-line deduction. IRC 162(l).
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Old 01-27-2016, 04:27 PM   #5
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My first feeling is negative. You mentioned small HC subsidy, so I assume there is a current paycheck for DH. If so, this small amount will become smaller due to taxes on the profit you must pay.

In the second year you will become less profitable sind the company will not pay certification and insurance.

A wild card is the distance to the assignment. The travel costs are yours?

Use your tax program to measure the impact of this SE income on last year's taxes.
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