In 2011 my majority of income is from W2 as an employee, but there is a small portion ($8000) from 1099-MISC as an independent contractor. The W2 employer only paid my malpractice insurance premium, but I kept another long-held malpractice insurance paid by myself.
Can I deduct the second insurance premium?
The answer is yes. Then the question is: were any of these expenses related to your employment income as well? I'm guessing they were so you have to at least consider whether these expenses need to be allocated between Schedule c and Schedule a.
By doing so about half of 1099-MISC income would be written-off, will that trigger an IRS audit?
There's no defined way to allocate. It’s up to the taxpayer though there should be a method that's logical. For example, if your employer paid malpractice that covers the W-2 I'd have no problem allocating 100% of that to Schedule C. If you paid dues and you can show your employer didn't require them I’d allocate them to your Schedule C. Things like DEA licenses, etc... should be allocated in my opinion and I see no problems using an equal allocation unless you can justify a higher allocation to the Schedule C, just be prepared to support your decision. Worst thing that can happen with any allocation is that you get audited and it disagrees. They'll just reallocate.
What if I wrote off disability for the last two years? Am I screwed? What if I start not writing it off now? Any insights on what can happen then?
Is it the same for life insurance premiums? Should you not deduct those also?
1. if your lender requires it as a condition of their loan
2. as employee fringe benefit up to $50k of insurance
There may be other exceptions as well...