Self-Employed Health Insurance Deduction Worksheet

[Dan]

I have a question concerning the Self-employed health Insurance Deduction Worksheet. This worksheet is on Form 1040, line 29.

Question: Why are the following words not listed on line 4 of that worksheet. Enter your net profit but ("Do no include Conservation Reserve Program payments exempt from self-employment tax")? (CRP payments)

It makes a lot of difference how much you can deduct on Form 1040, line 29 when you include the CRP payments.

On Schedule SE these CRP payments are shown on line 1b and reduce the self-employment tax.

Looking for an early reply.

[DANRVAN]

The deduction is limited to the net profit from the business which includes the CRP income whether subject to SE tax or not.

Good question.

[Dan]

Then why does it say, "do not include CRP payments?"

[jainen]

>>why does it say, "do not include CRP payments?"<<

That's not all it says--the whole restriction is "do not include CRP payments exempt from self-employment tax."

The definition of net profit for this deduction is based on the elements of SE tax. There are several possible ways of calculating this and various special rules. For the last four years retired and disabled farmers have not had to pay SE tax on CRP payments, so anything using the same definitions must also exclude them.

[Dan]

Thanks for your replies! Let me give you an example!

1. You have a net profit of $28,678 on Schedule F

2. Of the profit in line 1, $24,128 is from CRP payment

3. What amount do you include on line 4 of the self-employed health insurance deduction worksheet?

The above goes to the original question. The worksheet in the ATX program does not say anything about "do not included Conservation Reserve Program payments" whereas publication 535 on page 20 does. One tax program I have deducted the CRP payments from the net profit and entered $4,550 on line 29 of Form 1040. The ATX program does not subtract the CRP payment. Why? Is there something I'm missing?

[jainen]

>>Is there something I'm missing?<<

Yes, you are indeed missing something. I don't mean this pejoratively, but ATX is not the gold standard for professional tax software.

ATX is a fine program in its price range, but you can not expect it to do everything for you. It relies on you the preparer to research the tax code for the specific circumstances of your clients. You must determine the proper entry for each line, even when ATX does not provide all the details for less common calculations.

I have had similar problems with ProSeries, which competes with ATX. This year I moved all my tax work to an accounting firm using Lacerte. But that has its own limitations and quirks (e.g., Schedule C auto expense is entered on Form 2106). And of course the tax code itself is full of conflicts and gaps.

[DANRVAN]

Good answer.  My source was an analysis of the tax code.  Digging deeper, I see section 1402(a)(1) makes reference to section 202 of the Social Security Act.