How does Self Employment Income  Sole Proprietor – Schedule C

get reported for

MAGI – Modified Adjusted Gross Income?

How do you compute Obamacare Subsidy vs Premium deduction? 

Income from your business get’s reported for Covered CA MAGI Income subsidies basically by what you put on your Schedule C,  1  and 1040 Form .

Schedule C Profit or Loss from Business

Schedule 1  Adjustments to Income

Learn More⇒

IRS publication #974 Premium Tax Credits 

MAGI Gross Income – Line 37  – 8 b  for Covered CA subsidies.  

Schedule C

Instructions.

Problems figuring your income and expenses mid year?

• Try Quicken on how to produce monthly & quarterly reports.
• Try your own banks or Wells Fargo AUTOMATIC spending & income reports – they can be adjusted to your specific needs.

Iteration 

If you get tax subsidies through Covered CA to pay your premium,
the deduction claimed for the premiums under §106  * line 16  and the Premium Tax Credit (PTC)

that gets  computed,
taking the deduction into account, must be less than or equal to the premiums

Now that’s a mouth full isn’t it!

Check out  Publication 974 where there are special instructions for figuring the self-employed health insurance deduction and PTC if you or your spouse was self-employed, you or a member of your tax family was enrolled in a qualified health plan and you may be eligible for the PTC.

Because the amount of the self-employed health insurance deduction may affect the amount of the PTC, and the amount of the PTC may affect the amount of the deduction, a taxpayer who may be eligible for both may have difficulty determining the amounts of those items.

A taxpayer who may be eligible for both may follow the instructions in this part to determine amounts of the self-employed health insurance deduction and PTC that are allowable under the law.  ^{Publication 974}

Resources & Links

If you earn less than $60k, tax software is available for Free!

VITA  IRA Volunteer Income Tax Assistance

IRS Publication #535 Business Expenses

What about estimating and uneven income?  Kaiser Foundation FAQ’s.

IRS Pub. #974 Page 56.  Use the Premium Tax Credits  and not the Self-Employed Health Insurance Deduction Worksheet in Publication #535.

Main Small Biz Tax Credit and Related Pages

See our MAIN PAGE for Section 106 tax deduction for health premiums.

Health Insurance Deduction Line 29  for self employed

Schedule C – Line 12 Biz Income or Loss,  Line 29 Health Insurance Premiums,  Line 37 Adjusted Gross Income,   MAGI Income

Home Office Deduction

Self Employed Deduction for S Corp Owners

Details on Obamacare Subsidy and Line 29 deduction

Premium Tax Credit # 8962 Health Coverage Tax Credit #8885 Form 1040 and Instructions Self Employed – New Definition under Health  Care Reform – Introduction AB 1672 – (1992 to 2013) Small Group Health Rules prior to Obamacare

IRS Tax Tips for Self Employed

If you are self-employed, you normally carry on a trade or business. Sole proprietors and independent contractors are two types of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. Here are six important tips from the IRS:

• SE Income. Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
• Schedule C or C-EZ. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet certain other conditions. See the form instructions to find out if you can use the form.
• SE Tax. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, attach the schedule to your federal tax return.
• Estimated Tax. You may need to make estimated tax payments. Try IRS Direct Pay. People typically make these payments on income that is not subject to withholding. You usually pay estimated taxes in four annual installments. If you do not pay enough tax throughout the year, you may owe a penalty.
• Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
  • Our webpage on the Home Office Deduction  
• When to Deduct. In most cases, you can deduct expenses in the same year you paid, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms on IRS.gov/forms anytime.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

• Form 1040-ES, Estimated Tax for Individuals
• Publication 505, Tax Withholding and Estimated Tax
• Publication 535, Business Expenses

IRS YouTube Videos:

• Estimated Tax Payments – English | Spanish | ASL

How much subsidy to take?

Max Herr  —

When I work with a client who is self-employed and whose income is irregular/inconsistent from month-to-month, if he/she is eligible for any amount of premium tax credits, I first urge them to not take them in advance at all, if the premium for their chosen health plan is within their means to begin with.

If, however, they need the help from Uncle Sam to pay premiums, then I recommend that they accept no more than 50% – 75% of what CoveredCA estimates their monthly tax credits to be. By doing this, it gives breathing room to earn more money, and lessens the risk of having to repay any credits, or minimizes the amount of credits to be repaid.

If their income ends up as projected or less, then they will receive the balance of unused tax credits as a refund (or applied to any unpaid tax owed).

See our webpage on subsidy now or later