Comments on: Ignoring IRS 8995 Instructions to Double-deduct Self-employed Health Insurance https://evergreensmallbusiness.com/ignoring-irs-8995-instructions-to-double-deduct-self-employed-health-insurance/ Actionable Insights from Small Business CPAs Mon, 03 Feb 2020 22:53:34 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Steve https://evergreensmallbusiness.com/ignoring-irs-8995-instructions-to-double-deduct-self-employed-health-insurance/#comment-7734 Mon, 03 Feb 2020 22:53:34 +0000 http://evergreensmallbusiness.com/?p=9333#comment-7734 In reply to Michael.

Hi Michael,

I think an S corporation for a sideline or part-time business is really tough to make work. You have discovered first hand the reason why. You can avoid the employee SS taxes but not the employer SS taxes. (And there isn’t a slick way to sidestep the bookkeeping you reference.)

As far as whether Section 199A changes things, I would guess the usual case is, even with 199A you usually still don’t win with with a part-time S corporation.

That said, I’m sure one can construct examples where the 199A benefit more than pays for the extra payroll tax costs of the part-time S corporation. So you’d want to just run the numbers for your specific situation.

BTW, this final disclosure. I love S corporations. So if I have a bias, the bias is to set up an S corporation… Just so you know.

]]> By: Michael https://evergreensmallbusiness.com/ignoring-irs-8995-instructions-to-double-deduct-self-employed-health-insurance/#comment-7732 Fri, 31 Jan 2020 19:41:37 +0000 http://evergreensmallbusiness.com/?p=9333#comment-7732 Hello Steve,
I have a question regarding your article “Should You Use an S Corporation for a Sideline or Part-time Business?” This article was written before the 199A deduction law. My first question is do you have an updated opinion on the s-corp vs. sched C after the 199A law has been passed? My second question: is there any way of getting around the 6.2% FICA for s-corp wages if the owner-employee has a first job and whose salary is above the wage base.

I have a side business that I started in 2019 as a s-corp, because my income would be above the threshold level. This would allow me to have W-2 wages (whereas with a sched C, I would not have W-2 wages.) However, as I’m doing my taxes for 2019, I realize that in my ‘main job’, my income is above the social security wage base – and thus I’m paying 2X on FICA for the s-corp wages. Whereas if I had been a sole prop, I would not have to pay any self-employment (FICA) taxes – I’d still pay the medicare portion. That said, if I had the sole prop, I would not benefit from the 199A deduction. Your thoughts on this would be greatly appreciated.
Thank you for your time and thoughts,
Michael

]]>