Maybe OT: savvy medical expenses manager

What I really need in a medical expenses manager is intelligent context-sensitive help, a la TurboTax. It would encorporate references to relevant IRS rulings, Private Letter and others. I have significant unreimbursed medical expenses, and I have a hard time figuring out which ones I can claim as deductions on my federal income tax. IRS Publication 502 does not cut it, as I have twigged to the business about "facts and circumstances".

Maybe what I really need is a CPA with experience or good access to a source of distilled experience. So far, I have not found one. Where do you go for help?

Una

Reply to
Una
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Hi, Una.

Yes! My opinion obviously can't be unbiased, but you are absolutely right.

I have been asked this question hundreds of times and I still don't have a good answer. We have all seen pillars of the community unmasked as charlatans, but word of mouth is still the most reliable information available most of the time. You might start with your local yellow pages, then see if any of your friends have had dealings with some of these. Remember, though, that the biggest ads may be from firms who need paid advertising the most because their word-of-mouth reputation is not the best. (Personally, I always subscribed to the philosophy that a professional should not advertise; I listed simply my name, address and phone number under CPA in the yellow pages. These days, I'm dismayed at the advertising and promotion done by even the most-respected - and probably quite ethical - CPA firms.)

My best answer to this question: ask your friends, especially those who might have had similar tax problems, who they have used and would recommend.

Remember that Publications (with large "P") and all other official publications (Revenue Rulings, Revenue Procedures, official instructions for the 1040 and other forms, and a host of others) were all written by IRS attorneys and staff and based on the tax COLLECTOR's interpretation of the Internal Revenue Code, as passed by Congress. Courts have said that your attorney's opinion is just as valid - until the judge hears both opinions and decides which is correct.

You can read the official publications all you want and never find a dissenting opinion. And the TurboTax Help file is written by Intuit's attorneys, who sure don't want to get sued by you or by the government, so only "safe" advice is offered here. If several courts have heard your issue and have disagreed, you will hear about only the ones decided for the IRS, with no mention of the other - at least until a higher court decides the IRS was wrong.

I'm not sure what "twigged to" means, but "facts and circumstances" decide many tax cases.

Like most items in the tax code, medical expense deductions are quite simple - until they get complicated, and then they can get VERY complicated! Before I retired over a dozen years ago, we had already seen deductions allowed for a trumpet that parents bought on the advice of an orthodontist to help straighten their son's teeth, and an indoor swimming pool that a lady in a northern state had built into her residence so that she could follow her doctor's advice to swim every day, even during the northern winters. You might find those examples in an IRS Publication now, but you sure didn't before those cases were finally decided. And you would not have found them in the TurboTax Help file then, either.

So you need a CPA (or a TAX lawyer) who can apply education and experience to your situation and advise you based on all the facts and circumstances in your case. Once you've chosen your CPA, give him/her all the facts; don't try to filter them yourself with your own interpretations of what you might have read. (There's no line on the tax form where we can write "significant" or "large"; we need numbers!)

Good luck. Maybe you will find time to report back your experience, although it might take months or years to know the results.

RC

Reply to
R. C. White

"twigged" = "caught on", "got wise"

To a first approximation, "significant" means it matters to me. But I do have numbers. I have all records organized and entered in personal accounting software. The difference between a "safe" (favors the IRS) interpretation and a reasonable interpretation of what is deductible is over $20,000 for one year.

I am working on the word-of-mouth angle. It is slow going. Is there some reason I need to consult a local professional? Are there state licensing issues?

What sources of distilled experience do CPAs / tax accountants / tax attorneys have? Is there some subscription service or association or database an experienced CPA would rely on?

Una

Reply to
Una

Thanks. That's what I suspected. ;>(There's no line on the tax form where we can write

That's a big enough number for most of us. Assuming a 28% tax rate, that could be a $5,600 tax savings - which would probably cover a good CPA's fee.

Yes. Each state makes its own rules on who is allowed to practice public accounting. There were CPAs before there was an income tax. The main reason for licensing public accountants is to assure lenders and investors that the financial statements prepared and presented by borrowers and corporations are believable. The assurance comes from an examination (an audit) of those statements by an expert accountant who is independent of their issuer. The state examines the education, experience and character of each applicant and administers a challenging written test, then issues a "certificate" to those who it finds to be qualified to practice in that state. The requirements vary from state to state, but the examination is uniform among all the states. It is considered one of the most difficult of all professional examinations, and only about 14% of candidates pass all parts on their first try. (At least, that was true 50 years ago, when I took it; I don't have recent statistics.)

While auditing financial statements so that the public may rely on them is the justification for licensing Certified Public Accountants in the first place, over the past century CPAs have become recognized as tax experts, as well.

While most CPAs are not attorneys, a familiarity with business law is essential to the practice of accounting. CPAs must know about title to property, forms of investment, how corporations and partnerships are formed and governed, and have a working knowledge of many other legal concepts and practices. A local CPA will be more familiar with taxes of his own state than a visitor would be. Such topics as community property vary widely from state to state; mortgages and land contracts are treated differently; many other local practices are learned just by living in the jurisdiction. Of course, having your CPA in the same town also makes it more convenient to consult on matters that come up, too.

When I was a sole practitioner in a small town in Oklahoma, with my practice limited to taxes, I subscribed to "tax services" that cost me over $4,000 a year - in the 1980s. And I spent at least 3 hours a day just reading new cases, rulings and other tax literature so that I could advise my clients. CPAs also are required to engage in continuing education in order to renew their permit to practice each year. States vary, but a typical requirement might be at least 40 classroom hours per year. (That's why I stay retired; if I did a single tax return for a fee, I would first have to "catch up" after several years of no such education, or be guilty of practicing without a permit. I can keep calling myself a CPA by paying a small annual fee to the Oklahoma Accountancy Board, but I can't actually practice without meeting the continuing education requirements. See my Sig, below.)

This continuing education, both formal and informal, is how a good tax CPA stays up with the current tax climate. It also helps to have a lawyer who specializes in taxes and spends a lot of time and effort staying current. The CPA/attorney team can evaluate the taxpayer's "facts and circumstances" in light of recent cases and rulings and decide whether a deduction is likely to be allowed or challenged - and what are the chances of success if a challenge is appealed within the IRS or to the courts.

Your best source of word-of-mouth advice to choose a CPA might be the attorneys that you know. They work with several CPAs and probably have a good idea of which local CPA is aggressive enough - but careful enough - to get the best results for you.

Sorry for the long post, Una. But if you hang around this NG much, you'll see that many of my posts are like this. ;^}

RC

Reply to
R. C. White

Hm. A CPA practice limited to taxes? Meaning, not bookkeeping? Were most of your clients businesses (for profit, nonprofit?) or persons?

Now that is a problem. The only local attorney I have dealt with did something I think was totally uncool. I had a general question about state law, that happened to relate to a real estate transaction I was entering. The attorney asked who the other party was. The other party was the estate of a dead guy. The attorney said no problem, there was no conflict because the attorney did not represent the estate. But, the attorney did represent the estate's executor, and principal heir, and did not tell me that.

I live in a very small town. Choices are limited. Expertise also may be limited, but on the other hand many people have medical expenses.

No problem. I see you think a lot and for some reason you'd rather think about work than gardening or breeding fluffy lap dogs. :-) And I understand the appeal of Usenet: you can work exactly when and as much as you want, with next to zero aggro. If only we got paid for it, life would be perfect.

Well, I'll keep working on finding a CPA and/or attorney. Tedious but probably worth it.

Una

Reply to
Una

First I got 20 years experience as a "generalist", doing bookkeeping, auditing, management advising - and taxes. Then my partnership decided that I would be the "tax partner" for the firm. Among other things, I became the chairman of the taxation committee for our local chapter of the CPA society and president (and one of the founders) of our estate planning council. So, when I moved from California back to my native Oklahoma, I had not signed an audit report in a few years, but I was pretty confident of my tax qualifications.

My small town had no "specialists" of any kind, not even a pediatrician. There were 2 dozen lawyers in our town of 7,000 (40,000 in the large county), but they all said things like, "I don't know anything about taxes; I just handle divorces." It seemed to me that the town NEEDED a tax specialist. I did not accept any auditing engagements and did only enough bookkeeping for my tax clients to get the numbers for their returns. Much of my tax practice did not involve preparation of returns, but advice on estate planning, divorce settlements, business buy/sell transactions and such. (And there were a lot of amended returns to correct errors made in prior years by the taxpayers or their previous tax preparers. Sometimes these claimed refunds; other times they required more tax payments, but they allowed my clients to sleep better, knowing that their tax histories were in order.)

In addition to the other small-town aspects, there is this: Many of my most eligible prospects in Poteau would rather take their tax work to Oklahoma City or Tulsa - or to Stigler, just to avoid "baring all" to a neighbor. That was OK with me, because I had many clients from Stigler who came to Poteau for the same reason. Substitute your own town names and you should be able to find a qualified CPA within a reasonable distance.

My wife is the gardener - but I help. ; Well, I'll keep working on finding a CPA and/or attorney. Tedious but

Reply to
R. C. White

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