Can i give a independent contractor health coverage?

Question

I was always wanting to know, even tho i will not be elligable to do so, but if im being generious and want to in my own will to give the indpendant contractor health coverage, will this also be a tax deduction for me or tax write off?


Thank you:

Answer 1

If you have a business and if you have a group health insurance policy, it is probably not practical to add an independent contractor to the policy because your insurance company will not allow it. - If you pay the premiums on the independent contractor's health insurance policy, it could result in a deduction for you as a business expense, but it would be taxable compensation to the independent contractor. - It might be simpler to just pay the I.C. enough to buy his own insurance. Self employed independent contractors can't write off the cost of health insurance for themselves on a Schedule C (The form that is used to report profit and loss from a sole proprietorship business) - but they can write off 100% of the premiums as an adjustment to income on the first page of form 1040. - This is not quite as good as being able to take the deduction on a Schedule C, because the net income shown on Schedule C is subject to social security tax as well as income tax.

Answer 2

Your question is not very clear.

If you have an independent contractor and are furnishing him/her with health insurance, one of two things may happen.

1) The IRS will re-classify the independent contractor as an employee. You will then be responsible for withholding all applicable state and federal payroll taxes in addition to penalties. It is NOT normal for an independent contractor to receive benefits from someone they contract with. The independent contractor would then seem more like an employee.

2) The health insurance will be deducted as an expense - not health insurance, but if you are a business, it will be deducted as payment you are making to the independent contractor. In other words, you would be paying him/her in insurance. They would have to report the equivalent of the premiums as income and you would have to send them a 1099.

If you have a group insurance through your business, your insurance carrier will not insure non-employees under your policy. If you are caught adding non-employees, this may be fraud and they may prosecute you for damages in excess of the premiums and payments made.

If you're looking for a tax write-off and you're not a business, then the answer is NO. They have to be your dependent and it has to be qualifying medical expenses, which that would not be.

Answer 3

According to this article, no. An independent must pay for their own benefits. Otherwise perhaps they would not be considered independent and instead "employees." You as an employer would then be liable for payroll taxes, etc. I think the independent contractor would rather take advantage of all the other tax benefits they have that an employee doesnt.