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Question for the Money Doctors

Question submitted on Dec 2, 2012.

Question

I have a contractor that I report their income on a 1099. Can I pay their health insurance and medical bills and deduct them?

Answer

All payments made to or on behalf of an independent contractor should be reported on Form 1099-MISC. The contractor can deduct the health insurance costs paid on his or her behalf.

However, payment of such benefits might lead the IRS to conclude that the person is an employee, not an independent contractor, so this issue should be reviewed carefully.


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