Some help with US taxes and your medical bills.

Disclaimer
==========
First of all, I'm not a tax accountant. I'm just a guy who was
dissatisfied with the big tax companies, and managed to get a bigger
deduction than they could. This is not to be construed as official
tax advice, see your tax accountant for that.

Cancer and taxes in the US
==========================

Cancer can be very scary, what with all the surgeries, expenses,
chemo, radiation, and such. You just don't need any more problems to
deal with. This short note is some ideas of how people can deal with
the financial part of cancer expenses and taking tax deductions for
them.

First of all, log ALL of your expenses that have not been paid by
insurance. Keep a notebook, for each expense put down the date of
service, the doctor, the amount of the charge that was not paid for,
and what the charge was for (office visit, lab test for blood work,
etc.) Try to be specific in the "what" column.

You must have a receipt for each expense.

Even better is to do a spreadsheet on the computer with these same
columns. At the top of the "amount" column, it should be the sum of
all the expenses.

In the US there are several ways to deduct medical expenses. You can
even deduct expenses for a baby sitter, house cleaner, or chef to
come to your house if the dependant is under 13 years old. (So, if
the parent is sick, the parent can deduct these expenses for their
pre-13 child.)

1. Medical deductions (you must file 1040)
2. Medical savings account (you must file 1040)
3. Flexible Spending Child Care Account (you must file 1040)
4. Child care credit (Form 2441, household income (AGI) must be less
than $30,000)

NOTE: there are some limitations with the Child Care Savings Account.
I think you can use the CCSA, or Form 2441 (Child care and dependant
expenses) but not both. And in any case, you cannot claim the same
expense more than once on different plans. Just remember, no "double
dipping".

Options 2 or 3 both cover expenses for your spouse or dependant.

1. Medical deductions.

This is what people think of when they think about deducting medical
expenses. This expense is put on the Schedule A (Itemized Deductions)
under "Medical expenses". You really don't get any benefit unless
your out-of-pocket expenses are greater than 2% of your AGI (Adjusted
Gross Income). You must use a 1040 form to use Schedule A. When you
use Schedule A, you use your Itemized Deductions, not a standard
deduction. But remember, a deduction is different than the exemption
you get for each child.

2. Medical savings account (a section 125 plan)

This is an account where pre-tax dollars are taken from your
paycheck. At the end of your "medical year" (defined by your
institution), any unspent funds are forfeited to the federal
government. However, when you have an expense not covered by your
insurance, you send in a receipt to the person who manages the MSA at
your business, and they reimburse you for the expense.

So, if you had to pay $10 for an office visit, submit the $10 to your
MSA person and you will get a check for $10 back. Expenses covered
are "medically necessary" services or items, like: crutches, lab
tests, other equipment (bandages, gauze, medical tape), office visit
copays, drug copays, and probably nurses who come to your home, and
other in-home care, wheelchairs, oxygen, etc.

FLASH: OTC drugs are now reimbursable via this plan. See
http://www.jsonline.com/bym/your/sep03/169354.asp.

The max reimbursement for the year is $5000 or the employee's earned
income.

3. Flexible Spending Child Care Account (a section 125 plan)

This works the same way as the MSA: pre-tax dollars are taken out of
your paycheck and put into an account. You can get reimbursed for the
following expenses: child care/baby sitting, house cleaning, and a
cook. House cleaning and cook can be reimbursed only if the child is
less than 13 years old (not sure, it could be 11 years, check your
tax pubs.)

These expenses are also covered: nursery school (pre-school), summer
day camp, day care, after school programs.

The max reimbursement for the year is $5000 or the employee's earned
income.

4. Child care credit (Form 2441)
First, this is only for people whose household earns less than
$30,000.

Conclusion
==========
Remember, the IRS is wrong in answering questions 50% of the time, so
don't call them. Check with a tax accountant, or just start reading
the instructions and publications. I have found that some tax
accountants are not familiar with all the tax laws for
individuals/families, so try to find one that is.

How to get more info on your own
================================
- Look at a 1040 form and Sch A. Look for the lines about Flexible
Spending Medical Account or Fexible Spending Child/Dependant Care
Account.
- Now look in the instructions to see what they tell you. They will
often refer back to a publication.
- Get that publication off the internet.
- Highlight the parts that show: how you qualify, and what expenses
qualify. Also highlight (maybe in a different color) expenses that
DON'T qualify.
- Now get a logbook/spreadsheet and write down all the expenses that
qualify.

- Search on Google.com for the info that you're looking for.

More information
================
- IRS. www.irs.gov
- Pub 553, Summary of tax law changes for the current year.
- Pub 525, Taxability of long-term/disability benefits.
- Some info and links about flex accounts.
http://www.ebpanh.com/flexible_spending.html

Minutae
=======
- New for 2003 tax year: Health Coverage Tax Credit can cover up to
65% of the health premiums you pay.
http://www.irs.gov/individuals/article/0,,id=109915,00.html