Are all insurance premiums for the owner of a single member LLC personal expenses or are some (e.g., legal malpractice insurance for lawyers) business expenses?

beverly3 · ‎December 10, 2018

I have a single member LLC and pay medical, dental, vision, life, disability and legal malpractice insurance out of my business operating account. Having legal malpractice insurance is required to run my business. So, is it a personal expense paid for through a Member Draw or a business expense paid for through a different type of account?

I record insurance payments in my operating account and assign them to my Member Draw equity account. Do I need to record the transaction anywhere else for my balance sheet to be accurate?

qbteachmt · ‎December 10, 2018

"premium payments for personal insurance are deducted on schedule A of the 1040 as well as medications, etc, see the instructions for schedule A"

Health Insurance Premiums (medical, vision, dental) fall into a different category than Life and are not Sched A if you fall under the Self-Employed rules as "earned income". Disability, we don't have enough info. Malpractice is "ordinary and necessary for business."

"Deduction for self employed isn’t new

If you buy your own health insurance, you should definitely know about the long-standing health insurance premium deduction for the self-employed.

Congress implemented a 25 percent deduction on self-employed health insurance premiums in 1987 and made it permanent in 1994. The self-employed received even better news in 2003 when premiums became 100 percent deductible.

The deduction – which you’ll find on Form 1040, Line 29 – allows self-employed people to reduce their adjusted gross income by the amount they pay in health insurance premiums during a given year. You’ll find the deduction on your personal income tax form, and you can file for it if you were self-employed and showed a profit for the year."

https://www.irs.gov/uac/Newsroom/Dont-Miss-the-Health-Insurance-Deduction-if-Youre-Self-Employed

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qbteachmt · ‎December 10, 2018

"premium payments for personal insurance are deducted on schedule A of the 1040 as well as medications, etc, see the instructions for schedule A"

Health Insurance Premiums (medical, vision, dental) fall into a different category than Life and are not Sched A if you fall under the Self-Employed rules as "earned income". Disability, we don't have enough info. Malpractice is "ordinary and necessary for business."

"Deduction for self employed isn’t new

If you buy your own health insurance, you should definitely know about the long-standing health insurance premium deduction for the self-employed.

Congress implemented a 25 percent deduction on self-employed health insurance premiums in 1987 and made it permanent in 1994. The self-employed received even better news in 2003 when premiums became 100 percent deductible.

The deduction – which you’ll find on Form 1040, Line 29 – allows self-employed people to reduce their adjusted gross income by the amount they pay in health insurance premiums during a given year. You’ll find the deduction on your personal income tax form, and you can file for it if you were self-employed and showed a profit for the year."

https://www.irs.gov/uac/Newsroom/Dont-Miss-the-Health-Insurance-Deduction-if-Youre-Self-Employed

beverly3 · ‎December 10, 2018

Thank you very much for this thorough & clear response.

Rustler · ‎December 10, 2018

insurance required for business operations is a business expense and should be paid from the operating funds in the business bank account or a business credit card

all personal insurance, if paid from business funds, are an equity draw

beverly3 · ‎December 10, 2018

Thank you. Do draws need to be recorded in more than the places I mentioned in the question above & can I deduct the premium payments for personal insurance?

Rustler · ‎December 10, 2018

premium payments for personal insurance are deducted on schedule A of the 1040 as well as medications, etc, see the instructions for schedule A

Whether some portion of personal insurance can be expensed to the business is something a tax accountant should be asked. All we can do is give you a general overview

Write the check or process a cash payment and use equity drawing as the expense for the check or cash withdrawal

beverly3 · ‎December 10, 2018

Thank you, Rustler.

Rustler · ‎December 10, 2018

You're Welcome

qbteachmt · ‎December 10, 2018

"I have a single member LLC and pay medical, dental, vision, life,"

Up to this point, these are personal. The health insurance rules might allow you to report some of the health insurance premiums on Line 29 of your tax form and/or on your sched C. We cannot answer this Tax Rule question for you; we cannot see your full financial picture.

"disability"

Let's stop here. If you report this as business expense, and you get hurt under this policy, the payout to you becomes taxable income. If this is personal, the payout to you would not be taxable. Again, though, no one on the Internet knows for certain; we cannot see your Policy.

"Do I need to record the transaction anywhere else for my balance sheet to be accurate?"

Draw is part of Equity, and is a balance sheet account. You make One entry = Write Check, and list DRAW. It is not an expense and is not seen on the P&L.

beverly3 · ‎December 10, 2018

Thank you. I appreciate you taking time to respond. You and Rustler have given me what I need.

sescarpa · ‎February 28, 2019

Okay, one step further ... S-Corp, owners health insurance is paid by company, and entered through a paycheck at the end of the year. I must not have it set up properly as the total paid for health insurance is showing up on the W-2 as "Other - $$$$" which is okay,but it is not included in the Box 1 wages total. Not sure how to set it up to be included here. I have not submitted 2018 w-2's yet, til I figure this out. 4th qtr 941 has been submitted, so I will need to do a 941-X for the 4th quarter to make the w-2 and 941's total correctly.

Any help would be greatly appreciated!

FritzF · ‎February 28, 2019

Hey there, @sescarpa.

Thanks for joining this thread. I'm here to help make sure your concern about the company paid health insurance in the W-2 form is taken care of.

The steps on setting up S-Corp medical payroll item can be found in this article: How to set up S-corporation medical payroll items. If that is how you set it up, I'd highly suggest reaching out to our Payroll Support team this time. They have tools such as screen-sharing that can check your account and verify as to why it is not included in the Box 1.

Here's how to reach them:

1. Go to: https://payroll.intuit.com/support/contact/?infosrc=qs&service=16.
2. Choose the Taxes tab, then click View Contact Info button.

Just in case, you can also check out this article for future reference: Apply S Corp Medical at year end for corporate officers.

That should point you in the right direction. Please let me know how it goes after contacting them. I'm always here if you have any follow-up questions. Take care!

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Are all insurance premiums for the owner of a single member LLC personal expenses or are some (e.g., legal malpractice insurance for lawyers) business expenses?