John Bullis: Odds and ends of tax law
February 19, 2013
Present tax law by Congress provides two kinds of deductions for medical expenses in 2013 that are claimed on Schedule A, form 1040. One group we will call “older” taxpayers, the other group is “younger” taxpayers.
In 2013, if the taxpayer is age 65 or older, or if a couple has at least one person age 65 or older, only 7.5 percent of Adjusted Gross Income is deducted from the medical expenses and the excess is a tax saving deduction for Schedule A.
On the other hand, the “younger” taxpayer, those under age 65, will deduct 10 percent of Adjusted Gross Income to see if they have any medical deduction.
We have already had 10 percent deduction when the Alternative Minimum Tax applies, for all taxpayers.
Is this just another illustration of how complicated our tax laws have become?
Whether 2012 W-2 forms must show the medical insurance premiums the employer paid depends on the size of the business. If the employer filed less than 250 W-2s in 2011, there is no requirement for the 2012 W-2s to report the medical benefits. But for employers with more than 250 W-2s filed in 2011, the W-2 is to report medical benefits such as insurance premiums.
If the smaller employers are not set up to keep track of the 2013 medical benefits, maybe they should make the changes to be able to report that information on the 2013 W-2s.
The losses from business operations are deductible, for many years, if the taxpayer can show profit intent. A recent case about a teacher that set up a private coaching business for young athletes had a string of annual losses that were all allowed. However, the teacher showed profit intent by actions. He acted in a business like manner by attending clinics and camps to promote the business. He had a separate business bank account and got advice on running and promoting the business.
He tried to implement some of the advice and kept trying to make a profit. The losses were allowed on his tax returns for several years in a row.
IRS finally agreed that pipeline workers such as welders and mechanics who use their own specially equipped vehicles can be reimbursed, tax free, up to $16 an hour (or $10 hour if the employer furnishes the fuel). And, they don’t have to keep detailed records of their expenses to get that deduction. Maybe it’s a good idea to keep track of the expenses anyway. If the actual expenses are greater than the “no substantiation” allowance, the actual expenses will save more tax.
Our tax laws must be changed to avoid at least some of the present complications!
Did you hear? “Knowing what you want is the first step to getting it,” by Louise Hart.
• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.