Tax reminder for every USA resident

[Jeffreyj]

Don't forget, in some cases you can deduct HIV items:
Prescriptions
Co-pays
Mileage to and from

Oh yeah, Dental Work too...See, life ain't too bad!

Just a friendly reminder. Be sure to remind your Tax Expert!

Best of luck to everyone!

[Oceanbeach]

Thank you Jeff,

It has been a long time since I had to file taxes and 2007 wasn't that much different.  I pick up the forms, do the math, don't have enough income to file and everythig goes into as long term file.  That file is 12 years old now and what? me worry?  Have the best day
Michael

[randym431]

A good reminder and nice thought, but only works out if you itemize.
And the deductions have to THEN break thru their set % limit.

If you work, and have insurance, and just pay co pays for your doc visits and pills,'
you probably won't be able to meet the requirements.
Da government... they know how to keep us in the hole.   

[tinydaniell]

but to get in on the money that they are giving starting in may you have to file a return to get it

[madbrain]

but to get in on the money that they are giving starting in may you have to file a return to get it

If you are "lucky" enough that your income is sufficiently low to qualify for it. Even though I had my worst year last year in a long time in 2007, with disability, unemployment and part-time work, I came close, but didn't make the cut for it.

[madbrain]

Hi,

A good reminder and nice thought, but only works out if you itemize.
And the deductions have to THEN break thru their set % limit.

If you work, and have insurance, and just pay co pays for your doc visits and pills,'
you probably won't be able to meet the requirements.
Da government... they know how to keep us in the hole.   

Yeah. However, if you work, and there is a Flexible spending account available at your company, use it and enroll, even if you just put a small amount. You can pay all your copays and doctor visits with it, pretax. But you have to use all the money within the same tax year as the contributions, or it's forfeited. Certainly not very "flexible", but it's better than paying after-tax for everything.

[md]

A good reminder and nice thought, but only works out if you itemize.
And the deductions have to THEN break thru their set % limit.

Yes, medical expenses are only deductible to the extent that they exceed 7.5% of your adjusted gross income.

Since my partner is completely disabled and is considered by the IRS to be a "chronically ill individual" I get to deduct all of his nursing home bills as well which means that in his case  the deductible medical expenses end up being about 150% of his income ...

So, he ends up not paying any taxes but I still have to file a return for him 

[randym431]

I'm not sure how the Bush tax rebate works.
I figured anyone with income from a job, even part time or temp,
could get the rebate. Only if you made a lot in income, did it drop
to $150? I'm cant remember the details.

And I thought people on SS, either retired or disability, got or will get $300?

What ticked me off was the republicans nixing extending unemployment benefits in the package.
So many around here are out of work from closings and layoffs. And many have ran thru
their unemployment, skimpy as it is. Foreclosures galore too.

They closed the Maytag plant, the life blood of the near by city of  Newton.
That Maytag guy in the TV spots was replaced by a Chinaman.   

But all those folks are out of work, and now out of benefits.
We can toss away billions on a stupid blood-oil war, but cant
give our own a little help here at home.

Dont get me started... getting off topic.

[J.R.E.]

What ticked me off was the republicans nixing extending unemployment benefits in the package.
So many around here are out of work from closings and layoffs. And many have ran thru
their unemployment, skimpy as it is. Foreclosures galore too.

They closed the Maytag plant, the life blood of the near by city of  Newton.
That Maytag guy in the TV spots was replaced by a Chinaman.   

But all those folks are out of work, and now out of benefits.
We can toss away billions on a stupid blood-oil war, but cant
give our own a little help here at home.

Dont get me started... getting off topic.

Also didn't mean to drift off subject, but this is Just sooo Sad. It's happenning everywhere. I knew some people years ago, that Lived up in Newton. Even if ( when) we elect someone responsible in November, it will be too late for those, even to extend unemployment benefits. It's got to be tough, for so many families... I imagine many of those families will move out of state, and look for jobs elsewhere.


Ray

[JeffInNYC]

Dear all,

I hope no one minds me chiming in here, but I have some thoughts on the topic I thought I would share.

First, yes, you may deduct all your medical expenses including your meds (MUST be prescription meds...so even birth control pills are deductible!!), co pays, self insured health premiums, EVEN transporation to and from the doctor (with certain situational limits).  BE CAREFUL NOT to deduct anything you get reimbursed for (lets say from filing medical claims) AND anything someone else paid for on your behalf.  As someone else said, to take advantage of these deductions, you must file using the long form and fill out Schedule A.  You start to see a tax benefit as the medical/dental costs you are deducting exceed 7.5% of your AGI (adjusted gross income) and you can find your AGI on Form 1040.  I usually advise people to file the long form - especially here in NY because the state and local taxes alone in many cases already exceed the standard deduction, so right off the bat theres a benefit to itemizing.

Here's an example with regard to medical deductions: lets say you have 50,000 in medical expenses for the year and your AGI is 100,000.   7.5% of the 100K AGI is 7,500  so you can deduct 42,500 of your medical expenses on Schedule A (which is 50,000 less the 7,500).

With regard to the tax rebate...Bush signed the bill giving 600 to individuals and 1,200 to couples with income caps of 75,000 and 150,000, respectively. Those with children get an extra 300 per child.  After the income caps I mentioned, the rebates begin to phase out - individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps are higher for those with children. Workers who make at least $3,000 but don't pay taxes would get $300 rebates.  I believe you must file a return...I highly doubt if you dont file that a rebate will be sent to you.

These rebates will probably cost over 100 billion dollars and the intent is to stimulate the economy.  But, I doubt the full economic impact will be felt as not all individuals will spend their rebates...some will save and many will pay down existing debt - like credit cards balances.

I hope this info is helpful.
Jeff

[madbrain]

Hi,

I'm not sure how the Bush tax rebate works.
I figured anyone with income from a job, even part time or temp,
could get the rebate. Only if you made a lot in income, did it drop
to $150? I'm cant remember the details.

And I thought people on SS, either retired or disability, got or will get $300?

What ticked me off was the republicans nixing extending unemployment benefits in the package.
So many around here are out of work from closings and layoffs. And many have ran thru
their unemployment, skimpy as it is. Foreclosures galore too.

They closed the Maytag plant, the life blood of the near by city of  Newton.
That Maytag guy in the TV spots was replaced by a Chinaman.   

But all those folks are out of work, and now out of benefits.
We can toss away billions on a stupid blood-oil war, but cant
give our own a little help here at home.

Dont get me started... getting off topic.

The rebate drops to $0 if you make over a certain amount, as JeffInNYC posted. For single that's anything over $87,000. That may sound like a lot, but not so much if you live in an expensive place. The median household income in Santa Clara county is $91,154. So on average, singles households here are not eligible for any rebate. That means gays in particular who can't get married.

And don't get me started on the war either. I wouldn't mind paying all those taxes if they went to something actually useful.

[Jeffreyj]

Wow,
Thanks everyone for your input. It reminds me of why I pay and extra 50 bucks to have my taxes done by an expert.

I lost my home to forclosure this year. I owe the IRS $7,000....Gee I wonder if I'll get the $300 rebate. I am not holding my breath.

It's been a tough year for me. Things can only get better for me, so I'm looking forward to that!

[SouthSam7]

Hi,

Yeah. However, if you work, and there is a Flexible spending account available at your company, use it and enroll, even if you just put a small amount. You can pay all your copays and doctor visits with it, pretax. But you have to use all the money within the same tax year as the contributions, or it's forfeited. Certainly not very "flexible", but it's better than paying after-tax for everything.

I had the worst experience you can imagine with our company's flexible spending plan.  I think part of it was due to the personnel lady's ignorance about the program.  Also, half the time they would reject a purchase as non-qualifying, and then I would have to try to find the receipt and mail it to them.  Meanwhile they would demand me to FUND my account (i.e. send them a check) to cover the cost of the in-question purchase. 

It sucked and I canceled it at the end of the year.  I've since looked on a chart on the Flexible Spending Plan's own website, and it showed that you don't save any money unless you make at least 30k and spend 10k on "qualifying" purchases.  I'll find the link if anyone's interested.

[Queen Tokelove]

Ok, wait? So if you collect disability, you can claim this rebate that Bush is doing? And you can also file for co-pays on meds if on disability? And what is this long form that someone mentioned? I thought when you were on disability you couldn't file taxes? And if someone chooses to repeat it again please put it in simple terms for me. Thanks...

[md]

Queen, I can't answer all of your questions but I think that I can explain the confusion around whether or not people "on disability" can (or need to) file tax returns.

At the federal level there are two different kinds of disability benefit.

If you have paid enough in social security taxes while you were working then you are entitled to receive SSDI (Social Security Disability Insurance) payments if you are disabled. You get SSDI payments as of right based solely on the fact that you have made sufficient social security contributions and the fact that you are disabled. It doesn't matter how much money you have or what other income you have, you still get SSDI. If Bill Gates became disabled he would be entitled to receive SSDI. So, depending on what other income they have, people who receive SSDI may have to file tax returns and pay taxes and, depending on the level of their other income, some or all of the SSDI payments themselves may be taxable.

If you don't qualify for SSDI, then there is another program called "SSI" (Supplemental Security Income) for which eligibility is based on financial need. To qualify for SSI you need to be either blind, disabled or over age 65 and have very limited resources and income. As far as I know, these limits are so low that (I believe) anyone who is entitled to receive SSI will, by definition, not have enough income to require them to pay taxes or file a tax return.

See the Disability Programs section of the Social Security web site for more details.

[madbrain]

Hi,

I had the worst experience you can imagine with our company's flexible spending plan.  I think part of it was due to the personnel lady's ignorance about the program.  Also, half the time they would reject a purchase as non-qualifying, and then I would have to try to find the receipt and mail it to them.  Meanwhile they would demand me to FUND my account (i.e. send them a check) to cover the cost of the in-question purchase. 

It sucked and I canceled it at the end of the year.  I've since looked on a chart on the Flexible Spending Plan's own website, and it showed that you don't save any money unless you make at least 30k and spend 10k on "qualifying" purchases.  I'll find the link if anyone's interested.

Sorry about your bad experience. What was the plan's managing company ?

I have had a few denied claims too. It sometimes takes a phone call and resubmission to fix it . For special stuff like supplements that is not normally eligible, it's harder. It will take a letter from the doctor to justify the expense. I just had a $500 claim for my supplements for this year paid out from my FSA - after my doctor wrote a letter with the supplement list and the words "for his diagnosis of HIV infection and and vitamin D deficiency". Seems that made all the difference to the FSA company ! This claim alone will save me nearly $200 in taxes.

You are confused about the FSA benefits. Most company plans won't even let you contribute more than $5000 to a healthcare FSA. Where did you get the $10,000 of expenses and $30,000 of income ?

You save money regardless of your income level except your annual healthcare spending is less than your contribution to the FSA plan . In this case, you will lose any unused money in the FSA. The solution is to reduce your FSA contribution. Use a low estimate based on your average previous years' of expenses to estimate your FSA contribution to make sure you don't lose anything.

Even if you are at the federal poverty level of $10,400, and thus pay no federal income tax, and you also live in a state with no income tax, you will still save the 6.2% social security and 1.45% medicare on your FSA contributions. You save them immediately since they don't get taken away from your paycheck anymore. Let's say you put $500 per year in your FSA and use it all - it will save you $38 annually in FICA/medicare. It's not much, but it's not zero.

I put aside about $2000 a year in my FSA, and I use every penny of it, for things like therapy (this adds up quickly at $90/hr since my therapist is out of network ...), doctor copays, prescription copays, OTC med copays (cold & flu meds, tylenol, gas-x, maalox, even local pain patches - most everything is eligible), vitamins/supplements (with doctor's note only).

Any amount put in the FSA is exempt from federal income taxes, California income tax, California state disability tax, and even social security and medicare ! Those taxes altogether add up to over 43% marginal for me. So by contributing $2000 to the FSA and using it all, I save up to $860 in various taxes annually. I can't really save the 6.2% social security since my income is greater than the maximum SS taxable by over $2000, so the FSA doesn't reduce my SS tax, and my actual savings is closer to $740. Still pretty good if you ask me. But the FSA paperwork is a pain.

[madbrain]

Hi,

Ok, wait? So if you collect disability, you can claim this rebate that Bush is doing? And you can also file for co-pays on meds if on disability? And what is this long form that someone mentioned? I thought when you were on disability you couldn't file taxes? And if someone chooses to repeat it again please put it in simple terms for me. Thanks...

You should file your tax return regardless of your situation for 2007. If you don't file, then you will not get the tax rebate even though you may be eligible for it. Some disability income is exempt from taxes. Not all. My CA state disability income was exempt last year. My private short term disability income was taxable. I'm not sure about social security disability income, I have never applied or collected that. This may be what you are on.

[Snowangel]

Queen-I called and asked my case manager about collecting disability and being eligible for the tax rebate and he told me were eligible and didn't have to file taxes.  I am going to double and triple check that out and I will let you know.
:0 Snow

[Basquo]

I thought you had to file a return to get the dinero, but maybe not:

http://www.irs.gov/irs/article/0,,id=177937,00.html#Scene

[Snowangel]

OOOh.Thanks, Basquo, that is very helpful!!
Snow

[SouthSam7]

MadBrain, I wish I was as smart as you!  The name of my managing flexible spending plan was ProcessWorks.  Here is a link to the calculator I used to figure out my savings: http://www.fsaandyou.com/calcpage.jhtml?id=fsaandyou/categories.inc.  I may have exaggerated the amounts in my previous posting, but I remember when I originally entered my income and medicine information in the calculator link above that it said I wouldn't save any money.

What happens if your flexible spending plan doesn't currently have enough funds in it?  For example: If I need to get a $100 prescription, and my account only has $80 in it.  Won't the debit card be declined?  I went to CVS at the end of December last year and charged all sorts of stuff to get it to add up to the amount in my account so they wouldn't keep all my money.  Was that necessary?  Would it have disappeared Jan 1st?

I guess I didn't know enough about it to make an educated decision.  But I swear that calculator told me I wouldn't save any money, so I got pissed and closed it out.

Sam

[SouthSam7]

I just did the calculator again and even if I spent 1.5k+ a year on prescriptions in co-pays I wouldn't save any money.  Maybe I did it wrong.

[madbrain]

Hi Sam,

MadBrain, I wish I was as smart as you!  The name of my managing flexible spending plan was ProcessWorks.  Here is a link to the calculator I used to figure out my savings: http://www.fsaandyou.com/calcpage.jhtml?id=fsaandyou/categories.inc.  I may have exaggerated the amounts in my previous posting, but I remember when I originally entered my income and medicine information in the calculator link above that it said I wouldn't save any money.

What happens if your flexible spending plan doesn't currently have enough funds in it?  For example: If I need to get a $100 prescription, and my account only has $80 in it.  Won't the debit card be declined?  I went to CVS at the end of December last year and charged all sorts of stuff to get it to add up to the amount in my account so they wouldn't keep all my money.  Was that necessary?  Would it have disappeared Jan 1st?

I guess I didn't know enough about it to make an educated decision.  But I swear that calculator told me I wouldn't save any money, so I got pissed and closed it out.

Sam

I would say either you entered your info wrong, or the site is broken. The FSA always saves you money, as long as you have healthcare expenses and use all the money in the FSA.

I tried the site . It's really not the most intuitive . I entered $1520 of prescription expenses, and it came up with $448 in savings. That's rather underestimating the savings for me, but it doesn't know the rest of my personal tax situation so there is no way the calculator on that site can make an accurate determination.

I think the only way the calculator could come up with $0 in savings is if somehow you had $0 in expenses. Then the site would recommend you contribute $0 to your FSA and there would be no savings.

I don't use the debit card for my FSA. I always pay for my expenses on my own (with a rewards credit card that I pay in full every month), then submit the expenses to my FSA for reimbursment, and they do a direct deposit to my checking after it's approved. Usually I get the money back before I have to make the payment on the credit card. The plan always wants documentation at the end of the year anyway even if you paid with the card. If you don't have the funds available in your FSA, your transaction for the full amount might be declined if you pay with the debit card. In that case, just buy it yourself, and submit it as an expense to your FSA plan. They will pay you back to the available balance in your FSA.

And yes, you did the right thing in using up the money before Dec 31. It could disappear on Jan 1. Some plans have a grace period and let you use the money for a few more months of the next year, but not all.

[Jeffreyj]

Wait a second. I have been on disability for 8 years now, and I have filed a tax return each year. did I not have to? i doubt it Queen. I just got my 2006 return done. I noticed that approximately 55-60 % was taxable. I itemized tho. Plus I used to get Private disability, until they just stopped paying me...long story but I'm suing...UGH!

[Assurbanipal]

And yes, you did the right thing in using up the money before Dec 31. It could disappear on Jan 1. Some plans have a grace period and let you use the money for a few more months of the next year, but not all.

Technically, for a flexible spending account, that grace period should be only to submit claims that you actually incurred in the prior year.  So you absolutely want to budget a little low so that you will spend it all by year end. 

I agree with Madbrain that its difficult to see any way you won't save on taxes.  Basically a flexible spending account lets you participate in the big US tax subsidies that apply to all employer-provided health care spending (your contributions to the account are deemed to be an agreement with your employer to reduce your pay and instead get a higher level of health care benefit that just happens to reimburse all your specific purchases)

There are some new types of accounts called health savings accounts or healthcare reimbursement accounts that allow unspent monies to carry over from year to year.  But those are typically funded by your employer rather than by you.  If you have any questions it's worth checking in with the human resources office at your employer. You don't have to tell them what you are spending the money on, just get a confirmation that you will lose any unspent monies.

A

[allopathicholistic]

I thought you had to file a return to get the dinero, but maybe not:

http://www.irs.gov/irs/article/0,,id=177937,00.html#Scene

Thanks - Tres helpful. A recorded message on one of the IRS answer lines says people receiving disability needn't do anything to receive the stimulus moolah except wait for a special form to come in the mail. So I assume it comes, you send it back and voila but maybe I heard wrong. Probably 

[allopathicholistic]

Here's an example with regard to medical deductions: lets say you have 50,000 in medical expenses for the year and your AGI is 100,000.   7.5% of the 100K AGI is 7,500  so you can deduct 42,500 of your medical expenses on Schedule A (which is 50,000 less the 7,500).

Expenses or paid bills? I can't imagine someone having 50k in fully paid (out-of-pocket) bills in 1 year. If so, more power to them

[madbrain]

Hi,

Technically, for a flexible spending account, that grace period should be only to submit claims that you actually incurred in the prior year.  So you absolutely want to budget a little low so that you will spend it all by year end. 

That depends on the plan. With my plan this year there is a "grace period" where 2007 monies can be used up for expenses incurred in early 2008 (until March 15). But it was only announced this year, and there is no guarantee that it will happen every year. And I don't need to take advantage of it since I used all my 2007 contributions for 2007 expenses.

[Assurbanipal]

Hi,

That depends on the plan. With my plan this year there is a "grace period" where 2007 monies can be used up for expenses incurred in early 2008 (until March 15). But it was only announced this year, and there is no guarantee that it will happen every year. And I don't need to take advantage of it since I used all my 2007 contributions for 2007 expenses.

Oops! Apologies Madbrain, you are right.  A few plans have adopted a grace period (of up to 2 and a half months) to use up your money.  IRS legalized this approach in 2005 and it is slowly spreading.

[allopathicholistic]

Regarding the 7.5 thing I wish I knew about it in the 1990's when I was negative and on Wall Street and the picture of health yet I was paying a monthly premium for Oxford health insurance which I didn't even need! I could've saved quite a bit of cash  Oh well. By the way Oxford did nothing for healthy me. I was healthy on my own accord.

[allopathicholistic]

A cool tip you should know about: You can request the IRS send you your history by faxing them a simple 1 page form

Here's the form, revised January 2008:

http://www.irs.gov/pub/irs-pdf/f4506t.pdf

Best thing = There's no fee and it only takes a few weeks for them to send you what you need.

[madbrain]

Regarding the 7.5 thing I wish I knew about it in the 1990's when I was negative and on Wall Street and the picture of health yet I was paying a monthly premium for Oxford health insurance which I didn't even need! I could've saved quite a bit of cash  Oh well. By the way Oxford did nothing for healthy me. I was healthy on my own accord.

If you were getting health insurance through your job, then the premium was already paid pretax. You would only be able to deduct it if you bought individual health insurance on your own.

[allopathicholistic]

If you were getting health insurance through your job, then the premium was already paid pretax. You would only be able to deduct it if you bought individual health insurance on your own.

I realize that. It wouldn't have been my intention to try to deduct anything during my time at Smith Barney because other than the premiums I was paying for Oxford which again I didn't need I didn't spend a dime on my health, i.e. I was just naturally healthy yet paying for Oxford when I didn't need to. Oxford must have loved me because I didn't bother them one whit yet my premiums were helping their bottomline. Theoretically you can say my premiums were helping my fellow Oxford plan participants but now I'm getting off topic. So essentially I'm saying I would have worked without insurance cuz I was HIV negative back then. Of course doing that now would be very very unwise since I need expensive ARV`s.

edited for clarity

[allopathicholistic]

CAUTION
Some words of caution re: H&R Block, Jackson Hewitt, etc., etc.:
http://finance.yahoo.com/taxes/article/104463/10-Things-Your-Tax-Preparer-Won't-Tell-You

[allopathicholistic]

More stuff to either

1. Fry your brain
or
2. Make you giddy because it's so much fun 

http://forums.poz.com/index.php?topic=10028.0 <--- Typical me,  I'm in that old thread more than once. What a shocker. ... Hey, I like to be on the up-and-up. Special retro-thanks to Allan Q for sharing so much information in last year's tax thread.