I began to prepare 1040-X amended returns for two clients to claim the medicare premiums as a H & A insurance deduction because they have a schedule C business. In both cases the refund which resulted was less than my fee would have been to prepare the 1040-X. So, in most cases it is not worthwhile.
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Breaking even ??
Dang - what are you charging?? A few mouse clicks should take care of things for a return already in the data base, and a little "goodwill" factor frequently can pay dividends to an accountant later on.
Worst case scenario would involve a replacement Form 1040 pages 1 and 2, replacement Sch SE, and perhaps a replacement Sch A. The essentially single action of entering the "correct" medical insurance amount would set everything in gear, and most software can easily handle the rest via before/after scenario using the regular amended return procedures (with a copy of the original return in hand).
I guarantee (for an existing client) that I could do everything within a 30-minute window...and it is "off season" now.
One would think a new de minimis $1200 adjustment to income would be fairly beneficial to most clients, especially when it is a factor for both federal and state income tax returns as well as likely reducing the SE tax.
OTOH, if an "older" person was already able to deduct the Medicare premiums on Sch A, the change would not be so dramatic.
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30 minutes? I think I can shave some time off of that, FedDuke. Probably do one in less than 10 minutes.
But, let's clarify something. Will the deduction also flow through to the schedule se for prior years? I thought that applied on to 2010 on up.ChEAr$,
Harlan Lunsford, EA n LAComment
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Time matter
I was allowing time to fuss at the printer, fix another cup of coffee, and perhaps visit the bathroom. Regardless of the time involved - it ain't much with the proper software!Originally posted by ChEAr$ View Post
I've had a couple of clients using the self-employed health insurance deduction over recent years (and none of them are yet eligible for the disputed Medicare consideration for Sch C!!). I would think the only "change" would be simply to replace the "old" insurance amount with the "new" insurance amount (inclusive of Medicare) and the software would take care of the rest. Hoping the software would pick up on the Medicare premiums as automatically being "eligible" in the first place might be a stretch for amending older returns....but I really don't see that as a significant problem to anyone who uses software but is not dependent upon such to "think" for the accountant.
FEComment
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Don't forget that a 1040X opens the whole return for audit as not just the change is examined.
And with my recent experiences with 1040X on the FTHB credit and the massive extra time, I wouldn't attempt one of these to save the client a few bucks for goodwill purposes.
It would be my luck that more time would be needed for more documentation for something else that my client would refuse to pay my fee for since I opened the can of worms.Jiggers, EAComment
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I thought of charging $50 to prepare amended returns to claim the medicare premiums as a deduction for self-employed clients. The first return I calculated only resulted in a refund from the 1040-X of $31. This resulted in his income tax going from $31 down to zero. My client would not be happy if I charged him $50 for this. Since a1040-X may NOT be efiled, we must PRINT out copies of the federal return and in some cases one or perhaps TWO state returns for the client to mail and he must pay postage. Plus we must PRINT out these same returns for the client to KEEP as his copies. I always PRINT out the 1040-X AND the amended 1040 and all schedules and submit these to IRS and the state or states involved to ensure that they understand the calculations. This can amount to many pages. It took me only a few minutes to calculate the matter. That is NOT the issue. The issue is the PAPER and TONER and time consumed to PRINT out the amended tax returns and related returns. Another client would have gotten a larger refund but I believe she would not wish to be bothered for the small amount of refund involved. Such clients are often semi-retired and report a small business profit. Often their federal income tax is already zero. Drake Tax Software is NOT allowing the medicare premiums deduction on the scedule SE for 2008 and 2009. I believe this is correct. THAT is the reason for the sometimes small benefit of filing a 1040-X. I believe the deduction in the SE tax is only allowed starting in the year 2010 as ChEAr$$$ stated in his comment above. For a high income client, the tax refund could be very substantial.Comment
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The additional refund was well worth it on
on my own tax return, but then I have a low cost preparer -- me.Comment
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Page 1-12 of THETAXBOOK next to the bottom says that prior to 2010 self-employed health insurance is NOT a deduction in computing self-employment tax.Filing an amended return to claim this deduction could change the medical expense deduction and in rare cases could change the Making Work Pay Credit.Comment
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No, se deduction for med ins is only for 2010. I don't think it is even for future years. Yet.Originally posted by ChEAr$ View PostComment
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I should have clarified that mine was a rhetorical question. (grin)Originally posted by Burke View Post
But seriously, even if one tried to amend for 2009 or 2008, the software would balk.ChEAr$,
Harlan Lunsford, EA n LAComment
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Well, don't despair. The tax code is like the weather: if you don't like it, just wait a few minutes. It'll change.Comment
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dyne
There are two different deductions involved. The deduction for the calculation of SE tax is for 2010 only, however the above the line deduction for self employed health insurance is for other years also.Comment
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