My Employer Paid Health Insurance Stipend for Retirement is Being Taxed on a 1099 MISC as Income.

[arachniod]

When I retired, my employer offered to pay 50% of my current employee health insurance or give me 50% of the current premium toward an insurance carrier of my choice. I chose to receive the 50% monthly premium until the age of 65 and apply it to another carrier for my family. However, each year, my previous employer sends me a 1099 MISC as business income for said stipend. Therefore, my 50% health insurance stipend is being taxed as Self Employment income making my 50% stipend a 22% benefit. Is this normal? Should my medical insurance stipend be taxed as income? Why am I paying tax on a stipend being utilized for health insurance? Thank you.  

[ColeenD3 · Accepted solution]

This is other income, not self-employment income. In the past, SE income was reported on 1099-MISC, box 7, and other income in box 3. Now, all SE income is reported on Form 1099-NEC. 1099-MISC is no longer used to report business income.

Under Wages and Income, scroll down to Income from 1099-MISC.

• Enter the 1099-MISC exactly as printed, and then Continue.
• Enter paid family leave under "Other".
• Describe the reason for this 1099-MISC: Health Insurance
• Select None of these apply, then Continue.
• Select No, it didn’t involve work….. and Continue.

Select ONLY the tax year for which this specific 1099-MISC was issued. Do not select the year that you received the 1099. Select the year for which the 1099-MISC was issued. Select no other year. Then Continue.

• Select No, it didn’t involve an intent to earn money, then Continue.
• Select NO, then Continue.

Click the DONE button, and that does it.

[arachniod]

Good morning Coleen, Your instructions were extremely helpful and saved me $1,300 in taxes. I've been clicking on "Involved my Main Job" all these years. Nonetheless, my stipend has to be reported as "Other Income" even though its for Health Insurance. Oh well, I guess get taxed now or later. Too bad there's no exemption for this 1099 MISC. Thank you very much for your help. I really appreciate it.