1852 Flatbush Avenue - 2nd Floor
Brooklyn, New York 11210
|Client Update - quarterly newsletter||
Medical Clients - Tax Deduction Information
Social security cards and birth certificates
Driver's License or State ID
* Uniforms & maintenance (shoes, pants, hat, cap, scrubs, lab coat, gloves, masks, and laundry), IRS rules specify that work clothing cost and the cost of maintenance are deductible if work clothing are uniforms that are required by your employer they are not adaptable to ordinary street wear. Hence, If a medical facility requires you to have an emblem, name, or logo on your uniforms, then your uniform expenses are qualify as a tax deduction.
* Ordinary & necessary expenses. Lab fees, tolls & bridges, parking, professional dues, referral service, attorney fees, accounting fee, secretary, union dues, medical instruments, medical journals, board exams, medical bag, briefcase, business liability insurance, recertification fee, DEA registration/recertification, research services, transcripts, business cards & stationery, photo copies, reference materials, software, computer, printer, fax machine, professional license, office telephone, pager, recorder & tapes, answering service, patient calls, duty watch & repair, placement fees, work visa & legal expense, office rent, electricity, medical supplies, office supplies, office cleaning, waste disposal fee, sanitation, malpractice insurance, etc.
* Job-related travel expenses. Traveling expenses you paid from your home to your job are COMMUTING expenses and they are NOT deductible. If you work as an employee for a hospital during the day, and you travel from that hospital to working at another hospital or nursing home (2-jobs) during the same day (traveling between jobs), you could claim travel expenses of 53.5 cents per mile. In addition, you may qualify to receive credit for paying excess social security tax.
If you are a traveling health care professional (locally and out of town) you can deduct job related travel expenses (gas, repairs, registration, insurance, lease payment) if you used your vehicle to travel to multiple locations to visit patients (home health care, dialysis, wound care, etc.) during the same day, as a requirement of your job, if you did not received reimbursement from your employer. Bring or send us a copy of your records; or fill out our "Tax Organizer for Medical Clients." It contains a partial list of deductions. However, we would work with you to ensure that you receive all your tax deductions.
You may deduct unreimbursed moving expenses if your new job is more than 50 miles away from your former residence and you were employed full time in the new location for at least 39 weeks (9.75 months) during the 12 month period immediately following your arrival in the new location [IRC Section 217(c)(2)(A)]. The 39 month rule does not apply to you if you were a full time employee with your company and were transferred to a new location as a condition of employment that benefits your employer. Expenses not reimbursed to you by your employer such as the cost for transporting household goods and storage of household goods and personal effects and Plane tickets for you and your family, and lodging expense in the new location are "above-the-line" items and they are tax deductible whether or not you itemize your deductions [IRC Section 62(a)(15)]. You can deduct 19 cents per mile if you drive to the new location. Moving expenses, down payment or closing costs on your new residence that your employer reimburses you for are taxable income -IRC 82. However, your employer may exclude this amount from your gross income by treating it as a fringe benefit qualified moving expense reimbursement under IRC Section 132(a)(6).
* Send us Form 1099-SA if you have an employer sponsored Health Savings Account (HSA) that covered you and/or your family members.
* Medical and dental expenses (IRC Section 213). Expenses you paid for yourself, your dependent children and your parents that were not reimbursed to you by your insurance are tax deductible. They including co-payments for hospital, clinics, x-rays, eye glasses, dental, contact lenses, acupuncture, artificial limbs, prescription drugs, wheel chair, crutches, special bed for arthritic patients, medications, and health insurance premiums you paid. Your medical deduction is also allowable for payments you made during the year even if the medical care was received in a prior year. You can deduct 19 cents per mile for traveling to the hospital to see your doctor and up to $50 per night per person for lodging.
The cost of participating in a weight reduction program is not deductible. Beginning in 1991, expenses paid for cosmetic surgery are no longer deductible. However, the amount you paid for Restorative Surgery is tax deductible if the surgery is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident, trauma or disfiguring disease. You may also deduct the cost (buying, training and maintaining) of having a Guide Dog, the cost of installing and maintaining a Hot Tub & Swimming Pool in your home, or an elevator, escalator, or air conditioning system in your home if your doctor prescribed them for a specific ailment and signed off on them as being medically necessary. Auditors from the IRS may contact your doctor for details and pay a visit to your home (field audit). Life insurance premiums you paid as a beneficiary under a policy is not tax deductible [IRC Section 264(a)(1)]. However, Life insurance proceeds you received as the beneficiary as a result of the death of a family member who owned the policy is not taxable to you [IRC Section 101(a)(1)]. Funeral expenses you paid on behalf of a friend or relative is not deductible. If you want your money back, you can seek reimbursement from the estate of the deceased person.
* Alimony paid or received [IRC Sections 61(a), 215(a), and 682(a)]. If your divorce decree or separate maintenance agreement requires you to pay alimony and child support and you pay less than the annual total amount, your payment will first be applied to child support. The balance of your payment will be applied to alimony. Alimony received is taxable to the recipient/former spouse. It is deductible from gross income by the payer/former spouse. It is an "Above-the-line" item. Therefore, the payer spouse does not have to itemize deductions to be allowed the deduction.
* Child support is not taxable to the recipient/former spouse and it is not deductible by the payer/former spouse.
* Rent-Free Occupancy: Divorce decrees sometimes give the wife and children rent-free occupancy of the family home. Usually the rental value is not taxable to the ex-wife and not deductible by the ex-husband.
* New property and refinance property. Bring us the closing documents that your Attorney gave you when you buy a new property or refinance an existing property. Those documents contain important information that can qualify you for tax deductions.
* For residential property (single family home). If you own one or more residence (a home and a vacation home), you can deduct the mortgage interest and Real Estate Tax you paid for each property. Get Form 1098 form your mortgage company. Estimates cannot be use because it would contradict what the IRS has in your file; and your will be audited. The Law/IRS would not allow you to deduct expenses for repairs, heating, electricity, water, etc. because that is not a Rental property or Tenant occupied property. However, you MAY be qualified for the Federal Residential Energy Credit of 30% of the cost of installing Solar Energy Systems in your home; or New York State tax credit (Form-IT-241 "Claim for clean heating fuel credit") for using clean fuel oil in your boiler. For example, 1,800 gals of oil can get you back an extra $270. Bring us the documents you received from the Solar and oil company.
* For rental property (Tenant Occupied). You must report the amount of rent you actually received for each property during the year [IRC Sections 61(a)(5), 109 and 856(d)(1)] plus an itemized list of rental expenses you paid during the year for each property (IRC Sections 163, 164, and 212), such as mortgage interest, property tax, school tax, county tax, community fee, water, gas/oil, electricity, insurance, legal and eviction fee, advertising, extermination, cleaning and maintenance, carpet, management fee, and travel to the property. Minor repairs for plumbing, electrical, patch roof, and carpentry are deductible in full in the year paid (Treasury regulation 1.162-4). Equipment and capital improvement such as boilers, refrigerators, stoves, central air conditioning, new bathrooms, complete renovation of apartments and kitchens, including structural improvements made to the property such as a new roof, sidewalk, driveway, garage, fence, and basement are depreciated and deducted annually over a period of 3-15 years [IRC Sections 167, 168, and 1016(a)(1)].
* Business Consultation. Personal financial planning, Business operations reviews, Industry cost studies, Procedure-level cost Accounting, Business Planning & Budgeting, Increase Cash Flow (fee schedule negotiations with payers), Practice acquisition, Selling a practice, Partner entering or exiting and joint venture arrangement. Many of our clients have instituted more accurate financial reporting and begun successfully increase operating efficiency, improve cost containment strategies and monitoring their overhead expenses with our help and guidance.
* Insurance Services. Managed care contract review, Rate appeals & audit assistance, and Reimbursement Methodologies.
Actual Client Cases
2) Injury/casualty settlement: An injured boy received a settlement of $12 million. In the settlement his mother was awarded $250,000 reimbursement for quitting her job and caring for the handicapped boy; and another $300,000 to purchase and upgrade a suitable house for him to live in. Section 104(a)(2) of the Internal Revenue Code excludes the settlement the boy received from taxable income. However, the $250,000 his mother received is taxable income, but it too was excluded from taxes because the entire settlement was listed in court documents as personal injury to the son. However, if any part of the settlement was listed as punitive damages it would have been taxable under section 61.
3) Inaccurate deductions: I reviewed a tax return for a medical practitioner who was surprised that his business net income was high and he had to pay corporation tax. His company had leased a building and done a major leasehold improvement. It also leased equipment from a leasing company and later bought the equipment at a substantial discount after the company filed for chapter 11 bankruptcy. Finally, he moved his company into a new office building. A review of the company's tax return showed the discount was reported as taxable income. However, under section 108 the discount should have been deferred and then prorated over 5-years. This would have reduced the net income. Also, the lease payments were expensed. It is expenditure and it should have been capitalized to give the company a bonus depreciation and a deduction for the full cost of the equipment. The company had moved into a new office, hence the balance of the old leasehold improvement should have been deducted leaving the company with a net loss. This loss should be carried back to generate a tax refund for the company.
Thanks for taking time from your busy schedule to read this. I hope it has enlightened you.