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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I am currently unemployed and receiving unemployment ...

Resolved Question:

I am currently unemployed and receiving unemployment insurance in NY.
I am paying in insurance under COBRA
I might have a job in mid- August one day a week which will be pay be around $250 for the day.
However I will not be getting a W2 (I will be getting a 1099)

Am I considered “self-employed?”
I want to know how my healthcare premiums will be treated on my tax form
1.     Deducted on Schedule A has medical or
2.     Line 29 on Form 1040 (see 2007 form) Self-Employed Health insurance?
3.     Other?
4.     Can I still collect unemployment?
     
Submitted: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.

HelloCustomer

If the job you are taking will be reporting your income on a 1099 form, then they are classifying you as an independent contractor, which basically means that you are self employed.

As a self employed person, in order to take a deduction for your health insurance premiums against your income from self employment, the insurance plan must be established under your trade or business, and you cannot take this deduction to the extent that the amount of the deduction is more than your earned income from that trade or business. If you had such a medical plan established under your business, Form 1040 line 29 is where you would take that deduction.

Your payments for Cobra would not qualify as a direct business expense against your self employment income. You can, however, claim a deduction for your Cobra premiums on Schedule A for itemized deductions, but your total medical deductions must exceed 7.5% of your adjusted gross income before they become deductible.

As far as whether or not you can still collect unemployment benefits, the state of New York is one of the states that participate in the Self Employment Assistance Program.

Self-Employment Assistance offers dislocated workers the opportunity for early re-employment. The program is designed to encourage and enable unemployed workers to create their own jobs by starting their own small businesses. Under these programs, States can pay a self-employed allowance, instead of regular unemployment insurance benefits, to help unemployed workers while they are establishing businesses and becoming self-employed. Participants receive weekly allowances while they are getting their businesses off the ground. So chances are you may still qualify for benefits under this plan, but you would have to discuss your particular situation with a case worker with the NY Unemployment Division to get a determination.

If this answer was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you.

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and other Tax Specialists are ready to help you
Customer: replied 6 years ago.

Need some clarification:

I am not a business or plan to be one.

The check will be made/paid directly to me under my name.

Therefore I believe I would take the deduction for my COBRA insurance premiums using schedule "A" . Where do I claim the income I receive? Schedule C or a line on Form 1040.

I will contact NY UNemployment about still collecting since I am not starting my business(The firm that is paying me does not want to pay me using a w2, but use a 1099)

I

 

 

 

 

Expert:  Merlo replied 6 years ago.

Hello again gcohen,

I realize that you are not starting a business and maybe have no plans to, but the fact that this company will be paying you as an independent contractor, that in itself automatically classifies you as self employed as far as tax implications are concerned, so in effect, you are in business for yourself, even though you may not have formally formed a business or corporation. As a self employed person (which is how you will be classified), at the end of the year you will be liable for federal and state income taxes plus the full amount of social security and medicare taxes (which combined is currently 15.3%) of your net income.

Your income from this self employment will be reported on Schedule C. You are also entitled to take any expenses you may have in connection with earning this income as a deduction on Schedule C. Your net income from Schedule C will then carry forward to Form 1040.

Your Cobra insurance premiums are not in connection with your self employment, so they would be taken as a deduction on Schedule A.

If this has been helpful please press the Accept button. Positive feedback is also appreciated.

Thank you and let me know if you have more questions.

 

Customer: replied 6 years ago.

Thank you.

I will accept after one more clarification

You have been very helpful

Line 15 0f Scheduile C (on the 2007 form) says "self-employeed health insurance)

Why is the Health insurance I am paying not deductable on Schedule C

Iis it that "the insurance plan must be established under your trade or business".

I guess I will use Schedule A for the medical deductions

 

Expert:  Merlo replied 6 years ago.

Hello again gcohen,

Line 15 of Schedule C says "Insurance (other than health)". This line is basically used for deductions for business insurance, which you will not have.

If you had an insurance plan that was established as part of your trade or business, you would take a deduction for that directly on Form 1040, line 29, as you asked about in your first post. But since you are carrying Cobra, your deduction for premiums would need to be made on Schedule A.

 

Customer: replied 6 years ago.
Sorry I had another follow-up if you want to answer
The Schedule C would be in my name with my SS# XXXXX the 1099-MiSC would be in the name of the Company that is paying me?
Expert:  Merlo replied 6 years ago.

Hello again gcohen,

Sorry I didn't respond sooner to your last question, but I was not in the forum all evening and I am just now seeing your question.

The Schedule C is basically just a schedule that you use to report your earnings from self employment. It will be in your name as part of your tax return.

The 1099 form that you receive will be from your employer but it will be in your name. It is basically the same concept as receiving a W-2 form in the effect that it reports your earnings. The difference is that if you were an actual employee of this company, they would be deducting taxes from your paycheck. When you are classified as an independent contractor, you are then considered to be self employed, and you are responsible on your own for the payment of taxes, instead of having them withheld from your paycheck. The other big difference is that in addition to federal and state income taxes that you will pay, you will also pay the full cost of social security and medicare taxes. If you were being treated as an employee instead of an independent contractor, then the employer would pay half of the social security and medicare taxes, but as an independent contractor, you are liable for paying the full amount on your net earnings.

On your Shedule C you will report the amount of earnings reported on your 1099 form. You will also deduct any expenses you had in connection with your job. Your net income will then carry forward to your 1040 form.

I hope this helps clarify things for you.

Thanks again.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and other Tax Specialists are ready to help you

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