Self-Employed Health Insurance - From K1

[JohnH]

While preparing a client's 2012 return in Drake, I noticed a variance from ATX 2011 which made me stop and double-check. The client is an active member in an operating LLC which elected to be taxed as a partnership. On the K-1, there was an amount listed under "Other Deductions - Box 13, Item M", which is qualifying self-employed health insurance.

In ATX 2011, the amount of self-employed health insurance is properly listed on line 29 as an adjustment to AGI. But upon checking the figures, I discovered that the same figure was also transferred to Schedule A, line 1. The net result is that the deduction was taken twice.

In my client's case, the net effect isn't great because 7.5% of their AGI wipes out most, but not all, of the Schedule A amount. I will be amending their return because the "most but not all" still requires an amended return.

It may be that I made an entry somewhere in ATX which caused this double entry. I certainly should have caught it with a more careful review. But I just wanted to post this just in case anyone else has potentially has this problem. And I'd like to know if I did something wrong (other than just relying upon the software to get it right). Lesson learned - again.

[TaxCPANY]

I believe I've seen that error, when I hadn't made sure that I'd specified the 'active/particular' flow-through entity in ATX's drop-down for self-employed health insurance amounts -- i.e.., note that it's geared to grab not just (all) K-1's -- whether 1065 or 1120S -- but also Schedule C's. When ATX 'knows' where the premium is coming from, it remands it to line 29 or Schedule A, properly.

Hope this helps, TaxCPANY

[TAXMAN]

Does he partner owe se tax on the health ins? I think not but it is being included in guaranteed payments.

[Lion EA]

Yes, it's in guaranteed payments. He can deduct as an adjustment to income on his 1040. But, still SE tax. It was part of his compensation.

[jklcpa]

^ that. Totally agree.