SEHI deduction for partner, premiums paid personally

[jklcpa]

In order for a partner to claim the self-employed health insurance deduction, the instructions say that the policy can be in either the name of the individual or the business, and if the premiums are paid personally, then the partnership must reimburse the partner and include those reimbursements in guaranteed payments reported on the K-1 ( ETA - must be on the K-1 in order for the policy to be considered in the business name).

Isn't there still the conflict between the DOL rules and IRS rules regarding medical reimbursements? If the partnership reimbursed the premiums, wouldn't this constitute a medical reimbursement plan and violate the ACA rules and expose the business to the $100 per day penalty?

I'm confused.

[BHoffman]

See 2015 Pub 535. Also, I think IRS Notice 2015-17 is providing transitional relief for small businesses until further notice.  

[Lee B]

The Tax Book says the following:

1.  Self Employed persons are not eligible to participate in an HRA

2.. In all the other references in the 3 different Tax Books that I have, it says that partnerships

      can either pay directly or reimburse the partners for either policies in the partnership name

       or policies in the partner's name and  include the payments in "Guaranteed Payments"

 

What to do ????

[jklcpa]

Exactly Lee, that is my confusion.

Self-employed persons reporting on either C or F can purchase a policy in their name and call it SEHI, yet a partner with SE income must reimburse from the partnership, and that violates the ACA law that says HRAs are a no-no.

It's the same situation with Medicare premiums, that a partner would have to reimburse the Medicare premiums in order to designate those as SEHI too.

How can a partner ever take the SEHI deduction on line 29 of the 1040 without violating the law?

Am I stuck putting these premiums on Sch A then?

[Jack from Ohio]

1 hour ago, jklcpa said:

Exactly Lee, that is my confusion.

Self-employed persons reporting on either C or F can purchase a policy in their name and call it SEHI, yet a partner with SE income must reimburse from the partnership, and that violates the ACA law that says HRAs are a no-no.

It's the same situation with Medicare premiums, that a partner would have to reimburse the Medicare premiums in order to designate those as SEHI too.

How can a partner ever take the SEHI deduction on line 29 of the 1040 without violating the law?

Am I stuck putting these premiums on Sch A then?

YES

[BHoffman]

I think Jack is right.  I'm really cheesed off about the Publications.

2015 Pub. 535 clearly states that partners who receive SE income can use the SEHI deduction.  But, we can't use the Publications as having any kind of authority.  IRS and DOJ addressed SCorp shareholders in Notice 2015-17, but remain officially silent on partners.  Grrr...

 

 

[Jack from Ohio]

22 minutes ago, BHoffman said:

I think Jack is right.  I'm really cheesed off about the Publications.

2015 Pub. 535 clearly states that partners who receive SE income can use the SEHI deduction.  But, we can't use the Publications as having any kind of authority.  IRS and DOJ addressed SCorp shareholders in Notice 2015-17, but remain officially silent on partners.  Grrr...

 

 

Partners are no longer considered self-employed.  Thank You ACA!!!

[jklcpa]

5 hours ago, BHoffman said:

2015 Pub. 535 clearly states that partners who receive SE income can use the SEHI deduction.  But, we can't use the Publications as having any kind of authority.  IRS and DOJ addressed SCorp shareholders in Notice 2015-17, but remain officially silent on partners.  Grrr...

 

 

I know!  All of the research materials and references I checked, including the instructions and pubs, all say SE partners can take the deduction, but it appears that this is not the case.

[BHoffman]

BEGIN RANT....and then the stupid IRS will issue a late notice to fix the problem since the geniuses running our tiny little lives just...duh....forgot about partners while they were so busy with the SCorp shareholders.  I'm surprised there isn't more online squawking about this, and I bet most preparers are merrily using the SEHI deduction for their partners like always....END RANT.  

 

 

[Jack from Ohio]

Just now, BHoffman said:

BEGIN RANT....and then the stupid IRS will issue a late notice to fix the problem since the geniuses running our tiny little lives just...duh....forgot about partners while they were so busy with the SCorp shareholders.  I'm surprised there isn't more online squawking about this, and I bet most preparers are merrily using the SEHI deduction for their partners like always....END RANT.  

 

 

This subject has been covered at length in training and seminars I have been attending since May of 2015.  This is NOT new information.  These rules were supposed to be in effect Jan. 1, 2014.  The IRS had pity on all the corporate bookkeepers that were not up on the current law and extended the provisions till June 30, 2015. 

The information has been THOROUGHLY taught and promoted for almost 2  years now.

Am I the only one that has been paying attention??

[BHoffman]

Yes.  And we appreciate that

I think things are so complicated that none of us can know everything and so these forums are great!  

 

[Abby Normal]

It's not that partners are not considered self-employed under the ACA, it's that the plan is not considered 'established by the business' if the partnership does not pay/reimburse the premiums.

For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or the partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.

https://www.irs.gov/publications/p535/ch06.html#en_US_2015_publink1000208843