Richard Weaver's write up on tracking medical expenses with Quicken

I'm reposting Richard's write-up here because I'd like to make reference to it with some questions I have and I can't seem to find a copy googling for it to refer people to who might be able to help me.
Thanks again Richard for writing this up!
Part 1 of 2
Using Quicken to Track Medical Expense and Insurance Reimbursements =20 -------------------------------------------------------------------
R Weaver
formatting link

2002.11.21 editorial 2002.07.28 Added: medical expenses paid with pre-tax money are not deductable. (a generalization of the 2001.5.6 MSA edit) 2001.12.11 Added: more detail re. secondary carrier 2001.10.21 Revised categories. "exp" and "ins" categories have been revised, "supp" categories were deleted. Thus insurance coverage on non-deductable medical expense can be recorded in the same way as for deductable expense. Added: "When There Are Individual Limits" 2001.6.20 Added: interest to federal tax refund example Added: "sequence of submissions" to secondary carrier 2001.5.6 Added: medical expenses paid from MSA account are not deductable 2001.3.21 Added: Secondary carrier Added: Medicare Added: determining itemized medical tax deduction, see "T A X E S"
N O T E S --------------------------------------------------------------
The word "deductable" is used in two contexts: "tax deductable" (reportable on tax forms) and "insurer deductable" (what you must pay before insurance reimbursements begin).
And "tax deductable" means only reportable on tax forms; a tax deduction may or may not result.
Minor editorial improvements are not noted in the list of edits above.
S U M M A R Y ----------------------------------------------------------
Medical expenses can be substantial; my requirements are to:
-- Easily verify a service provider's billings
-- Verify that medical providers are being correctly paid, either by insurers or by myself
-- By inspection (i.e, by sight and without any, or with very little, work) of Quicken registers and reports, determine that anticipated insurance reimbursements are, eventually, correctly paid, either to the provider or myself. My insurance carriers reimburse 100%, 80%, or some random %, depending on the service.
Tracking insurance reimbursements is not just a favor to medical providers, there are financial implications for yourself. 1) insurance companies may have cutoff dates past which claims will not be accepted; you want to be sure that all claims are filed and prompt less efficient providers to correct and refile when claims are rejected. 2) tax reporting is dependent on the year copayments are paid and can be dependent on the year insurance reimbursements are received. 3) Medicare imposes a fee on late filings. 4) and, of course, if the insurance carrier doesn't pay - you likely will.
-- Verify that insurance deductible (the amount that must be paid each year before any insurance reimbursements will be made) is correctly calculated (yes, one of my carriers has even gotten that wrong).
-- Identify the medical expenses reportable on income tax forms ("tax deductable"). See IRS Publication 502 "Medical and Dental Expenses".
If your medical transactions are few and the above is but a few minutes work, then what follows is not necessary for you (although my method does not add significant work when entering medical transactions). Should you, however, have many medical transactions each year, involving multiple doctors, hospitals, and labs, then you may find my method of some interest.
I've developed this method from 1995 through today (late 2001). Medical expenses tracked for those years have ranged from $22,000 to $42,000 per year. My Quicken medical liability accounts have over 4,000 entries for those years; an average of 700/year. It usually takes 4 entries for a service (expense, insurance write-off, insurance payment, my payment) so that's 175 medical services/year. Every other day, right?
Success has not been 100%; there are billing errors I've never gotten corrected, insurance reimbursements I've never received, charges I've never understood - but I've come close.
My method is:
1. For recording medical transactions:
-- a liability account for each medical provider
"account for each" is the principal. Pragmatics are otherwise. Whatever is easiest, while still able to answer questions by inspection. I keep El Camino Hospital, El Camino Radiologists, El Camino GI, ... all in the same account. I also have a "Various Medical" account for providers that are used only a few times each year (and to which I move entries for providers no longer used, keeping the number of accounts down).
trivial hint: In the description field for each medical account, put the billing phone number (and hours) so that it's on your screen when you want to call about the account.
-- recording, as expense, the total cost of a medical service on the service date (as opposed to recording the amount billed to me on the date billed)
-- recording all payments to a provider with the service date (as opposed to the date payment was made)
-- recording all activity for a provider in the provider's account (for example: an insurance reimbursement sent to me is recorded in the provider's account, followed by a transfer to the account I deposited the reimbursement in)
-- categorizing insured medical expenses by the expected insurance reimbursement percentage. Insurance reimbursements are categorized matching the expense categorizations.
categorizing medical expenses as tax deductible or not.
Examples of categories are (my complete list is in the later details)
expN expense not insured, not deductible expT tax expense not insured, tax deductible expT80 tax exp. insured, anticipated 80% insurance reimburse. insT80 tax insurance reimbursement, 80% of expense less any write-off
Note: Insurance reimbursements are "expense", not "income". categories. They are not part of taxable income (if you are careful; see the later section on taxes), they serve only to offset expense. They are "negative expense", if you will.
-- using class to identify tax deductable amounts that are paid in a different year than the service date year.
2. Utilizing the register for a providers account to verify the provider's statement.
This can be done by inspection as each service date will, when all transactions have been entered, show a zero balance in the Quicken register. Well, usually by inspection -- some provider's statements are so convoluted (and so infrequent) that verification is a major project. (Verification is an important step; we have been billed for services on dates when we were out of town, we have been billed for -- and our insurance initially reimbursed for -- services performed on other people. Noting medical services in your calendar, diary, Day- Timer, ... provides a good reference)
An example of the entries in Dr. Bones register for one service is:
date category Payee memo Increase Decrease Balance
1/01 expT80 Dr Bones 300 300 1/01 insT80wo Dr Bones 100 200 1/01 insT80 Dr Bones 2/10 160 40 1/01 [check] Dr Bones 3/05 1234 40 0
On 1/01 there was a service, tax deductable, cost $300, for which an 80% insurance reimbursement was anticipated. On 2/10 the insurer: accepted only $200 of cost ($100 write-off) and processed a $160 reimbursement (80%) to Dr Bones. On 3/05, I wrote check 1234 for $40, the balance for that service, to Dr Bones.
3. Utilizing Quicken reports (examples later) to: -- check insurance reimbursements -- identify and age unpaid services
T H E A C C O U N T R E G I S T E R -------------------------------
I begin with a small scenario and, in a series of steps, refine the Quicken entries to what I find to be an adequate methodology. I actually went through a similar process, revising my early medical entries three times. The steps presented here are intended to be a logical progression; my own experience was less organized.
--------------------------
The scenario (year omitted from dates, mm/dd):
1/01 see Dr Bones, charges are $300. Anticipate 80% insurance.
1/31 receive stmt from Bones 1/01 service $300 balance $300
2/01 see Dr Bones, charges are $100. Anticipate 80% insurance.
2/02 see Dr Bones, no charge
2/10 letter from insurance company re 1/01: $200 of expense meets annual deductible. For remaining $100, 80% ($80) payment has been sent to Dr Bones.
2/28 receive stmt from Dr Bones prior bal $300 2/01 service 100 2/12 ins pay 80- balance 320
3/05 send Dr Bones $220 payment (the balance of 1/01 service)
3/07 see Dr Bones, charges are $150. Bones asks for immediate payment so I use Visa credit card to pay $150. Anticipate 80% insurance.
3/09 letter from insurance company re 2/01: Insurer's rate for service is $90 and is covered at 100%. Doctor has to absorb $10 reduction. Check for $90 enclosed and made out to me (not Doctor). Deposit check to my checking account.
3/10 stop at Dr Bones office to pick up WhoopeeVit, expense $10. Bones recommends for hangnails. Pay immediately, using credit card.
3/15 see Dr Bones, charges are $200. Anticipate 80% insurance.
3/31 receive stmt from Dr Bones prior balance $320 3/06 paid 220- 3/07 service 150 3/07 paid 150- 3/09 writeoff 10- (Bones got the EOB and knows about the $10 reduction, but I got the $90 check) 3/10 WhoopeeVit 10 3/10 paid 10- 3/15 service 200 balance 290
--------------------------
I know that I must have a liability account for each provider, recording both the provider's charges and all payments to meet my goal of using the Quicken register to verify the provider's billing.
Now I can record the scenario's transactions. I will use only one category, "expense: medical". The posts are to a liability account for Dr Bones (I've not shown the other side of transfer entries). "Date" is the date of service or payment. This is about how I first started using Quicken for medical services.
date category Payee memo Increase Decrease Balance
1/01 medical Dr Bones 300 300 2/01 medical Dr Bones 100 400 2/02 medical Dr Bones 0 400 2/10 medical Insurance 80 320 3/05 [check] transfer fr chk 220 100 3/07 medical Dr Bones 150 250 3/07 [visa] transfer fr visa 150 100 3/09 medical Insurance write-off 10 90 3/09 medical Insurance 90 0 3/09 [check] transfer to chk 90 90 3/10 medical Dr Bones WhoopVit 10 100 3/10 [dis] transfer fr dis 10 90 3/15 medical Dr Bones 200 290
Well, it is all there. But I can only answer one question, "Is the provider's statement correct?". To answer questions about "have insurance reimbursements been made?", "how much is tax deductible", and "have we paid our part", by inspection, I need to make some changes.
Instead of using transaction date to record entries, I will record all entries by service date.
The memo field is used for an audit trail. For expense and insurance entries, record the date of the source document (usually the EOB or provider's statement). For check payments, record the check date and the check number (the check number field is visible in the check register but not in the medical account side of the Quicken transfer; having the check number in the memo field is convenient when comparing a medical account register to a provider's statement or when printing a copy of the medical account register to send to the providers billing dept. - sometimes an easy way to resolve problems). For credit card payments, record the date of payment. And, of course, record anything else that might help.
Use a consistent style for memo date entries: mm/dd if the year is the same as the service date year, mm/dd/yy, if the year is different. Makes it easy when reviewing services where payment was made in a different year (see Taxes, below).
The revised entries, recorded by service date, are:
date category Payee memo Increase Decrease Balance
1/01 medical Dr Bones 2/10 300 300 1/01 medical Insurance 2/10 80 220 1/01 [check] transfer fr chk 3/05 1234 220 0 2/01 medical Dr Bones 3/09 100 100 2/01 medical Insurance 3/09 write-off 10 90 2/01 medical Insurance 3/09 90 0 2/01 [check] transfer to chk 3/09 90 90 2/02 medical Dr Bones 2/02 0 90 3/07 medical Dr Bones 3/07 150 240 3/07 [visa] transfer fr visa 3/07 150 90 3/10 medical Dr Bones WhoopVit 10 100 3/10 [dis] transfer fr dis 3/10 10 90 3/15 medical Dr Bones 3/15 200 290
I can now determine the service dates contributing to final account balances by inspection. Eventually every service date will end with a zero balance. Service dates that have a different balance than at the end of the prior service, have an outstanding balance that is part of the final balance.
- 1/01 is what I want each service date to eventually look like: service followed by payments, ending with a zero balance.
- 2/01 has not been fully paid; the 90 ending balance is not the same as the prior (0) balance.
- 3/07 is paid; the 90 ending balance is the same as the prior (2/02) balance.
So, by inspection I can see that for 2/01 I owe Dr Bones $90 (the insurance reimbursement that was sent to me) and for 3/15 I am waiting for the insurance reimbursement.
But have all the anticipated insurance reimbursements been made? For example: while 3/07 is paid from the providers view, does the insurer owe me money? And how much is tax deductible?
Now I am ready to discuss categories. Instead of just "medical", I will categorize medical expense entries by the kind of insurance reimbursement expected and whether or not tax deductible. Similar categories will be used for insurance reimbursements.
Some "exp" and "ins" category names are constructed from 3 parts: "exp" or "ins" - expense or insurance reimbursement "T" or "N" - tax deductable or not blank, 80, 100, var - the 80,100,var indicate insurance percentages (var=3Dvarious). You should choose percentages meaningful for your particular carriers. Just add to your category list the combinations you are likely to use.
My list of "expense:medical" subcategories is:
Expense Medical empcon tax employee "contribution" to company medical plan expTdedA tax insurer A deductible (replace "A" with name) expTdedB tax insurer B deductible (replace "B" with name) expTdedoffset tax Offsets any duplicate expTded... milageT tax milage deduction. See 1040 for rate/mile milageoffset offsets milage deduction LTHC tax Long Term Health Care Insurance premium LTHCReimbu tax LTHC premium reimbursement MedicareB tax Medicare B insurance premium MedicareBReim tax Medicare B reimbusement (some employers do) otherreimb tax other reimbursements (provider write-offs of small balances are an example) rxcopay tax Rx copayments, there is no insurance reimburse.
expT tax not insured, tax deductible expN not insured, not deductible
expT80 tax exp. insured, anticipated 80% ins. reimburse. insT80 tax insurance reimbursement, 80% of expense insT80wo tax insurance write-off, remainder will be at 80% insT80Estimat tax ins to be paid, we hope (see tax section)
expN100 not deduct., anticipated 100% ins. reimburse. insN100 insurance reimbursement, 100% of expense
expT100 tax exp. insured, anticipated 100% ins. reimburse. insT100 tax insurance reimbursement, 100% of expense insT100wo tax insurance write-off, remainder will be at 100% ins100Estimat tax ins to be paid, we hope (see tax section)
expTvar tax exp. insured, anticipated various% ins. pmnt insTvar tax insurance reimbursement, various% of expense insTvarwo tax insurance write-off, remainder will be at var % insTvarEstimat tax ins to be paid, we hope (see tax section)
Not as long a list as it appears - once you understand the pattern for "exp" and "ins" categories - and that your category list need include only those you will use.
You may have additional or different medical categories, taxable or not, depending on your particular case and your insurer's reimbursement schedules. The "tax" indication of some of the above may not be correct for your particular case. Read IRS pub 502. For some plans LTHC reimbursement may be classified for tax purposes as Miscellaneous Income (1040 line 21). Read IRS pub 502 again. Read your 1099s. Read this paragraph again.
While some categories are coded as tax deductible, what is really deductible is the net - what you pay, expense minus insurance reimbursements minus other payments. And it is deductable in the year paid, not the service year (Quicken classes are used to get correct tax totals for a year, see below)
In the revised example below the 1/01 entry has been divided into two entries, one for the insurance deductible part and one for the 80% paid part. This division would be done when the insurance EOB is received, not at the time of service (at the time of service, or from the medical provider's statement, it would not be known which submitted claims would be used to satisfy the insurance deductible).
All entries now have "Dr Bones" as Payee. This is necessary for the summary reports by payee that will be used when matching expense to insurance reimbursements. We still still know which entries are insurance reimbursements (from category) and can, if ever necessary, determine which insurer by reference to the EOB (we did put the statement date in the memo field).
The revised entries, with new categories, are:
date category Payee memo Increase Decrease Balance
1/01 expTdedA Dr Bones 2/10 200 200 1/01 expT80 Dr Bones 2/10 100 300 1/01 insT80 Dr Bones 2/10 80 220 1/01 [check] Dr Bones 3/05 1234 220 0 2/01 expT80 Dr Bones 3/09 100 100 2/01 insT100wo Dr Bones 3/09 10 90 2/01 insT100 Dr Bones 3/09 90 0 2/01 [check] Dr Bones 3/09 90 90 2/02 expT80 Dr Bones 2/02 0 90 3/07 expT80 Dr Bones 3/07 150 240 3/07 [visa] Dr Bones 3/07 150 90 3/10 expN Dr Bones WhoopVit 10 100 3/10 [dis] Dr Bones 3/10 10 90 3/15 expT80 Dr Bones 3/15 200 290
That's the final register, the basis for everything that follows.
C H E C K I N G I N S U R A N C E R E I M B U R S M E N T --------
How do I check, other than by going through each provider's account service date by service date, that all insurance reimbursements have been made? I use three (memorized) Quicken Summary reports (for 100%, 80%, various%)
-- Select all accounts
-- For the 100% report: categories expN100, expT100, insT100wo, insT100, insN100 For the 80% report: categories expT80, insT80wo, and insT80. For the various% report: categories expTvar, insTvarwo, insTvar, and otherreimb -- define rows to be payee -- define columns to be category
If you have been making ins...Estimat entries in anticipation of tax calculations, you likely want to include those categories as well.
Assume today's date is 5/31. I expect most services through 3/31 to have been processed by the primary insurer.
The 100% report for the example, through 3/31, shows
INC/EXP INC/EXP INC/EXP ... INC/ EXP EXPENSE EXPENSE EXPENSE ... EXPENSE Medical Medical Medical ... Medical Payee Desc expT100 insT100 insT100wo... total
Dr Bones 0 90 10 100
Curiously there is a 100% insurance reimbursement but no corresponding expense. Looking at Dr Bones register, above, for insT100entries I find 2/01
2/01 expT80 Dr Bones 3/09 100 100 2/01 insT100wo Dr Bones 3/09 10 90 2/01 insT100 Dr Bones 3/09 90 0 2/01 [check] transfer to chk 3/09 100 100
where I anticipated 80%, but payment was actually 100%. I should have caught that when entering the insurance reimbursement (but this example is better since I didn't). Deciding that I agree with the insurer (else I would call), 2/01 is corrected to
2/01 expT100 Dr Bones 3/09 100 100 2/01 insT100wo Dr Bones 3/09 10 90 2/01 insT100 Dr Bones 3/09 90 0 2/01 [check] transfer to chk 3/09 100 100
Running the 100% report again
INC/EXP INC/EXP INC/EXP ... INC/ EXP EXPENSE EXPENSE EXPENSE ... EXPENSE Medical Medical Medical ... Medical Payee Desc expT100 insT100 insT100wo... total
Dr Bones 100 90 10 0
and I now know that, through 3/31, all expected 100% insurance reimbursements have been made for all medical accounts.
Running the 80% report, through 3/31 (and after the correction of the 2/01 entry):
INC/EXP INC/EXP INC/EXP ... INC/ EXP EXPENSE EXPENSE EXPENSE ... EXPENSE Medical Medical Medical ... Medical Account Desc expT80 insT80 insT80wo... total
Dr A 100 72 10 18 Dr B 0 0 0 0 Dr Bones 450 80 0 ...
For the time period covered by this report, 80% of Dr. A's expenses (those expenses less write-off for which 80% insurance reimbursements were anticipated) have been reimbursed by the insurer. Dr B had no "80%" expenses.
For Dr. Bones I expect insT80 to be ($450 - 0) x 80%, or $360, but I only have $80. There are $360 - $80, or $280, of anticipated insurance reimbursements. This report would prompt me to make some inquiries about the aging insurance obligation for Dr. Bones.
The various% report does not have a simple test; its results must be accepted or investigated on a claim by claim basis.
W H E N T H E R E A R E I N D I V I D U A L L I M I T S -------
Insurance carrier's plan can contain limits/maximums, such as: 250/750 deductable for individual/family 2000/5000 maximum out-of-pocket for individual/family
If you choose to track these limits/maximums, you will need: - separate accounts for each doctor/patient combination. For example, instead of "Dr Bones" account, you will need "Dr Bones His" and "Dr Bones Hers" accounts. - separate categories for transactions not recorded in an individuals medical accounts. Principally "rxcopay" becomes "rxcopayhers", "rxcopayhis", "rxcopayson", etc.
The obvious reports, selecting accounts and categories, can then be used to track limits.
"Class" can be used instead. I choose to use separate accounts/categories as, for me, it is the minimal effort when entering transactions.
C H E C K I N G A G I N G U N P A I D S E R V I C E S ------------
Use a Quicken Summary report, select medical accounts, payee (rows), months (columns), and all categories, to identify aging unpaid services For example:
Medical Payees: net by Month 1/1/96 Through 4/14/96 4/14/96 Page 1 Selected Accounts =20 OVERALL Payee Description 1/1/96 2/1/96 3/1/96 4/1/96 TOTAL
Dr Dear -15 15 0 0 0 Dr Doe 0 -20 0 0 -20 Dr Cat 0 0 -238 -1,500 -1,738
For Dr Dear it appears that $15 in 1/96 expenses was recorded as paid in 2/96, an error in not using the service date for the payment. Inspection of the register for Dr Dear's account will verify this. The payment entry dates can then be corrected.
Dr Doe, for 2/96, had $20 more in expenses than in payments. At 3 months old and a small amount it is likely a service partially paid by insurance with the balance not yet paid by me.
Dr Cat shows "in progress", recent services likely have not yet been billed to me or processed by the insurer. No action is required.
A useful Quicken Graph: select net worth graph medical accounts
This graph shows medical account balances for the selected range of months. Current, and recent, months have large "in progress" balances while older months have smaller, eventually zero, balances (an effect of recording payments by service date). That account balances are, or are not, aging is easy to see.
M E D I C A R E -------------------------------------------------------
Assume a service of $60, Medicare allowed amount $50, Medicare payment of 80% of 50 =3D $40. The entries depend on whether or not the provider accepts Medicare Assignment (shown on the EOB).
Accepts Assignment (and Medicare sends check to provider): date category Payee memo Increase Decrease Balance
7/17 expT80 Dr Skull 8/11 60 60 7/17 insT80wo Dr Skull 8/11 10 50 7/17 insT80 Dr Skull 8/11 40 10 7/17 [check] Dr Skull 8/18 1234 10 0
Does Not Accept Assignment, paid in full at time of service (and Medicare sends check to you):
7/17 expTvar Dr Skull 7/17 60 60 7/17 [check] Dr Skull 7/17 1234 60 0 7/17 insTvar Dr Skull 8/11 40 40 7/17 [check] Dr Skull 8/11 40 0
Part 2 of 2
S E C O N D A R Y I N S U R A N C E C A R R I E R S ----------------
For a specific claim the primary carrier is the carrier that processes the claim first, the secondary carrier processes it second. We think of our carrier "ABC HMO" as our primary carrier, or "DEF Co" as our secondary - but those designations are for a specific time and not fixed for the year (and that is why the "expded..." categories are for specific carriers rather than labeled expdedPri, expdecSec). Suppose ABC HMO is your only, thus primary carrier, and you turn 65 in June. June and after Medicare is your primary and ABC HMO is now your secondary. But if your spouse is not yet 65, then ABC HMO is still primary on spouse's claims.
For a secondary carrier, record:
- amounts applied to that carrier's deductible (expded...). It is important to submit claims to both carriers until deductibles are met, even when the secondary carrier will make no reimbursement on the claim, so that when there is a later claim that should result in reimbursement, that claim does not go to meet deductible instead.
Also enter an expTdedoffset for the same amount as the second carrier's expded... entry duplicates expense already recorded for the primary carrier.
- any additional insurance reimbursement for the claim. Useing the "insTvar" category, or other categories as appropriate.
Examples:
For use in the following examples, the original Dr Bones 1/01 exp... and ins... transactions are:
date category Payee memo Increase Decrease Balance
1/01 expTdedA Dr Bones 2/10 200 200 1/01 expT80 Dr Bones 2/10 100 300 1/01 insT80 Dr Bones 2/10 80 220
Suppose we submit that 1/01 $300 claim as the 1st claim of the year to a secondary carrier with a $250 deductible. That carrier applies $250 to deductible and makes no other reimbursement. We record the 2nd carriers deductible and offset it so as not to affect Dr Bones totals. The additional entries are:
1/01 expTdedB Dr Bones 4/20 250 470 1/01 expTdedoffset Dr Bones 4/20 250 220
Suppose we submit that 1/01 claim as the 1st claim of the year to a secondary carrier with a $150 deductible and that carrier calculates a $120 benefit, reduces it by the $80 already paid by Medicare, makes a $40 reimbursement. As before, we record the deductible and offset. The additional insurance reimbursement is recorded as "insvar" (we have already recorded all of the expense with the entries for the primary carrier). The additional entries are:
1/01 expTdedB Dr Bones 4/20 150 370 1/01 expTdedoffset Dr Bones 4/20 150 220 1/01 insTvar Dr Bones 4/20 2nd carrier 40 180
Later in the year, after deductibles have been met, a $40 reimbursement from a secondary carrier could be entered with just:
4/01 insTvar Dr Bones 9/04 2nd carrier 40 180
My secondary states "If a doctor doesn't accept assignement, we allow a charge of up to 115% of the Medicare allowed charge and will pay the difference between the Medicare payment and 80% of the allowed charge" (so that my copayment is at most 20%). Consider a doctor office vist, $100, doesn't accept Medicare assignment, and I pay $100 at the office. Medicare allows $87 and reimburses me $71. In this example, 115% of 87 is more than 100 so the full amount is allowed, and my secondary will reimburse $9 for a total reimbursement of $80 and copayment of $20.
After the office visit I enter: 1/01 expT80 Dr Bones 1/01 100 100 1/01 [check] Dr Bones 1/01 1234 100 0
When the Medicare EOB is received: 1/01 insT80 Dr Bones 2/12 Medicare 71 -70 1/01 [check] Dr Bones 2/17 71 0
When the secondary's EOB is received: 1/01 insT80 Dr Bones 3/18 Secondary 9 -9 1/01 [check] Dr Bones 3/24 9 0
Sequence of claims submitted to secondary re carrier deductables:
In general (I've not surveyed how all secondary carriers work - thus the weasel words) the secondary calculates what the secondary would reimburse and then reduces that by the amount reimbursed by the primary. Suppose that both carriers have a $100 deductable and you have January and February claims of $100 each. If claims are submitted in calendar sequence to both carriers, then
1. Jan claim to primary: applies deductable, reimburses $0 2. Jan claim to secondary: applies deductable, reimburses $0 3. Feb claim to primary: reimburses $80 4. Feb claim to secondary: reimburses $0 (as primary has reimbursed $80)
But change the sequence, submitting the February claim as the first claim to the secondary:
1. Jan to primary: applies deductable, reimburses $0 2. Feb to primary: reimburses $80 3. Feb to secondary: applies deductable, reimburses $0 4. Jan to secondary: reimburses $80 (as primary has reimbursed $0)
Thus each carrier pays on claims the other carrier applied to deductable.
To make this happen:
1. At the beginning of year tell providers not to submit to secondary (better, tell them you have NO secondary).
2. When you have recieved EOBs from primary showing that deductable has been met, tell providers to again submit to secondary.
3. When you have received EOBs from secondary showing that deductable has been met, submit those claims withheld at step 1.
M I S C. S T U F F ---------------------------------------------------
That insurance deductibles have been correctly met can be checked with category totals.
Milage for medical purposes is generally tax deductible. The register provides a count of trips to Dr Bones (if you were curious why the 2/02 "no charge" was entered in the register, now you know) and at year end I make two entries in Dr Bones register (these could be in another register, but I prefer to see them in the same register -- there is less chance for error).
date category Payee memo Increase Decrease Balance
12/31 milageT Dr Bones 6 trips, 20m 10.80 10.80 12/31 milageoffset 10.80 0
With the two entries, Dr Bones account balance is unchanged yet tax reports will show the 10.80 deduction. And when reviewing Dr Bones register I know the milage deduction has been entered (I don't have to search some other account).
What if I write one check for two or more service dates. Or one insurance reimbursement covering two or more? I handle these in any of the following ways:
-- Suppose check number 1234 is for 5/15 and 5/25 services. In the checking account, I record two entries with duplicate check numbers (Quicken allows this, after a warning). And in the earliest date I put the total amount in the memo field.
date category Payee memo Inc Dec Bal 5/15 [Bones] 1234 transfer 7/2 1234 total $a+b $a 5/25 [Bones] 1234 transfer 7/2 1234 $b
Thus each service date has a complete record of payments. At check reconciliation time, the two checks 1234 are listed together, their total matching to 1234 on the bank statement.
-- If a medical account regularly has multiple transactions in one month and a single billing (example: an allergy doctor) then I enter a monthly payment using the last service date for each month and indicate in the memo field both the service dates and the transaction date "6/10 1234 5/1,8,15,23,30". Such an account shows a zero balance only at the last transaction of each month.
-- If an account has an immediate payment for every service (example: an account used for prescriptions) then I submit one insurance claim for each month and, as before, enter the insurance reimbursement using the last service date and recording both the range of service dates and the transaction date in the memo field. The prescription account register is different from most other registers: each service is immediately followed by a credit card transfer payment and each insurance reimbursement is immediately followed by a transfer of that reimbursement to checking.
Note: the prior paragraph was written when I paid the full amount for prescriptions and submitted insurance claims. Now I make only a copayment. That payment is recorded in the appropriate charge, cash, or checking account, category:RxCoPay, and no other entries are needed.
T A X E S --------------------------------------------------------------
I AM NOT A TAX PROFESSIONAL (so I might/likely have it wrong). I am not a tax professional (SO I MIGHT/LIKELY HAVE IT WRONG). THIS IS MY READING OF IRS PUBLICATIONS AND HOW I DO IT. THIS IS NOT COMPLETE; THERE ARE TOPICS NOT ADDRESSED -- THE AUTHORITATIVE SOURCE IS THE IRS --
There is a lot here about taxes rather than about Quicken. I can't separate the two; the Quicken entries are because of taxes so I end up describing both.
If you are not itemizing deductions because the standard deduction is "better" read the "Comment on Grouping Deductions".
If you are not itemizing medical deductions because of the 7.5% AGI restriction, read the "Comment on Grouping Medical Deductions".
If after reading those sections you are still not itemizing medical expense then skip the rest.
If you, or your spouse, will be age 65 next year, observe that checking boxes on 1040 line 37 increases your standard deduction; thus in the current year you need to be comparing next year's estimated itemized deductions to next year's increased standard deduction as you may want to begin grouping deductions this year.
Excerpts from IRS pub 502:
What Expenses Can You Include This Year?
You can include only the medical and dental expenses you paid this year, regardless of when the services were provided.
You can include medical expense your charge to your credit card in the year the charge is made. It does not matter when you actually pay the amount charged.
You cannot deduct qualifed medical expenses as an itemized deduction if you pay for them with a tax-free distribution (Cafeteria plans) (also see Medical Savings Account, MSA, Pub 969)
Insurance Reimbursement
You must reduce your total medical expense for the year by all reimbursements for medical expense that you receive from insurance or other sources during the year.
If you are reimbursed in a later year for a medical expense you deducted in an earlier year, you must report as income [1040 line 21] the amount you received from insurance or other sources that is equal to, or less than, the amount you previously deducted as medical expense. However do not report as income the amount ... that did not reduce your tax for the earlier year. ...
So, medical payments for tax deductions are determined by the year payment is made, while, using Quicken as I do, medical payments are recorded by service date.
I use a class to identify a medical payment where the tax year is different than the service date year. Indeed, I use the tax year for the class. That class must be used on all entries for that service. It is the exp... and ins... categories that carry the taxable, or not, indicator (and it's those categories that we have so carefully managed in the sections above). When class is added to payments entries as well, Quicken reports can be used to verify that all records for a service have the same class (the class total will be zero - I've been know to make a mistake and like to be able to check my work). Most medical entries will not need a class as the service date and payment dates are for the same year (i.e., I don't have to do much work to get it right).
Should there be insurance reimbursements to report on line 21, assign a class such as taxyearL21, "2001L21" for example, to that insurance reimbursement entry.
To help calculate the medical tax deductable for a year use a summary report, row=3Dclass, column=3Dyear, of medical tax deductible categories for all years. That report looks something like
transaction-year class description 1998 1999 2000 2001 1998 0 0 0 0 1999 -55 0 0 0 2000 0 -123 0 0 2001 0 0 -234 0 2001L21 0 0 55 0 9999 0 0 -10 0 other ... ... ... ... OVERALL TOTAL -4567 -4789 -5432 -678
The tax deductable medical expense for the year 2000 tax filing is: 5432 tax deductible total for the calendar year 2000 service dates + 123 tax deductible for 1999 service dates paid in the year 2000 - 234 tax deductible for 2000 service dates paid in the year 2001 + 55 insurance payment received in 2001 for expense paid in 2000 and deducted on 2000 tax return - 10 tax deductible for 2000 service dates paid in the year 2000 that we choose to not deduct (see Example 6 below) - ? year 2000 medical expense paid with pre-tax money. Look at the Quicken account for your FSA or MSA to determine distributions you received for year 2000 medical expense. (this assumes you didn't make Quicken entries to reclassify the FSA distribution amount as non-deductable)
----- ? total tax deductable medical expense for 2000
The 2001L21, $55, must be reported as income on 1040 line 21 for the 2001 tax year.
Just a little detail left - getting those classes on the appropriate entries.
Tax free distributions that must reduce tax deductable amounts can be accomodated by including in the calculation of your medical tax deduction for the year (above), or by making two entries that effectively recategorize deductable to non-deductable. For example:
12/31 expT FSA reimbursements -800 12/31 expN FSA reimbursements 800
Please read the following cases and examples in sequence, even if the particular case or example doesn't apply to you, as text in examples is not repeated in later examples.
Case 1: Medical deductions itemized every year; the only concern is getting it right and not having to record insurance reimbursements on 1040 line 21.
Example 1: On 1/20/01 we receive an EOB, stmt date 12/28/00, for a service dated 12/10/00. Having made no previous payment for this service we write a check to the provider (a 2001 payment) for the copayment and make the following entries:
date category Payee memo Increase Decrease Balance
12/10 expT80/2001 Dr Bones 12/28 300 300 12/10 insT80/2001 Dr Bones 12/28 240 60 12/10 [check]/2001 Dr Bones 1/20/01 1234 60 0
While the tax deductible expense (exp minus ins, 300 - 240 =3D 60) will be in the calendar year 2000 totals, it will also be in the class 2001 totals and thus we subtract it when calculating the tax year 2000 medical deduction (and will add it when calculating the year 2001).
Example 2. Saw the doctor 12/10/00, made a copayment at that time expecting 80% insurance, now its April 15 and time to file taxes, but the insurance reimbursement hasn't arrived. Entries, from 12/10/00 are:
12/10 expT80 Dr Bones 12/10 300 300 12/10 [check] Dr Bones 12/10 1234 60 240
Make the following entry
12/10 insT80Estimat Dr Bones 4/15/01 240 0
ins...Estimat entries are temporary; they will be replaced by actual insurance reimbursements (you can check with an itemized category report). With the ins...Estimat entry, the medical deduction calculated for this service is 300-240=3D60, which is the payment that was made. If you have no idea as to what, if any, insurance reimbursement will be made, see Example 6 below.
With the ins...Estimat entries: -- the exp... less ins... totals match the amount paid, which is the correct medical deduction amount.
-- the year's totals (which you use as you work on tax filing and budget planning for this year) don't keep changing as those last insurance payments dribble in.
-- you've identified all outstanding insurance claims and just might choose to call providers/insurers if processing lags.
When insurance is later received, revise the ins...Estimat entry to
12/10 insT80 Dr Bones 6/01/01 240 0
Example 3: Saw the doctor 12/10/00, didn't make a copayment, did enter the expense, and now its April 15 and time to file taxes. The entry made 12/10 looks like:
12/10 expT80 Dr Bones 12/10 300 300
Since payment will be in the year 2001, change this entry to:
12/10 expT80/2001 Dr Bones 12/10 300 300
Thus it will be subtracted when the year 2000 medical expense is calculated. Later entries for this service must include the 2001 class.
Example 4: Saw the doctor 12/10/00, paid in full and now its April 15 and time to file taxes. The entries made 12/10 looks like:
12/10 expT80 Dr Bones 12/10 300 300 12/10 [check] Dr Bones 12/10 1234 300 0
Make the following entry
12/10 insT80Estimat Dr Bones 4/15/01 240 -240
This is the same as example 2 except for paying the full amount instead of just the copayment. With the addition of the insT80Estimatthe medical deduction calculated remains $60, even though $300 was paid, thus avoiding having to report $240 on 1040 line 21 for the 2001 tax year filing. (tax codes specify the maximum you can deduct, tax codes do not require you to deduct anything, we choose to not deduct the $240 - even though it was paid in 2000 and qualifes as medical expense - so that we do not have to report next year's insurance reimbursment as line 21 income).
Case summary: When making a payment for a prior year service include payment year class on the entries for that service. Prior to tax calculation, examine accounts with nonzero balances and use reports to find providers service dates with missing payments or insurance reimbursements in the tax calendar year. If payment was made but no insurance reimbursement received, add an ins...Estimat entry (or class "999") for tax deduction calculation. If payment was not made, add a class to move expense and insurance (if any) to the next calendar year.
Case 2: Grouping deductions.
Example 5: On 12/30/00 visit the allergy doctor for a shot. We know charge will be $30, 24 paid by insurance and 6 by us. As this is a year we are deducting medical, and will not deduct next year, we want the payment made this year. So we write the doctor the $6 check before leaving the office and make the following entries:
12/30 expT80 Dr Bones 12/30 30 30 12/30 insT80Estimat Dr Bones 12/30 24 6 12/30 [check] Dr Bones 12/30 1235 6 0
When an EOB is received, stmt date 2/5/01, the insT80Estimatentry is revised to:
12/30 insT80 Dr Bones 2/5/01 24 6
Example 6: On 12/30/00 visit the doctor, charge $30. We have no idea how much, if any, will be paid by insurance. As this is a year we are deducting medical, and will not deduct next year, we want the payment made this year. So we write the doctor a $30 check before leaving the office and make the following entries:
12/30 exp80/9999 Dr Bones 12/30 30 30 12/30 [check] Dr Bones 12/30 1235 30 0
When, eventually, an insurance reimbursement is received for $24, remove the 9999 class and make the following entry:
12/30 insT80 Dr Bones 6/5/01 24 -24 12/10 [check] Dr Bones 6/25/01 refund 24 0
Why the "9999" class? What's going on here? To keep the deduction in 2000, we paid the full amount. Suppose tax filing time arrives before the EOB is received. If the "9999" class had been omitted, the $30 expense, paid in 2000, would be claimed as a deduction and the insurance reimbursement received in 2000 would have to be reported as Line 21 income. To avoid that, the "9999" class identifies this as expense that is not to be claimed until the EOB is received.
If the EOB is received before tax filing, the result is a normal case and expense less insurance is included in medical deductable.
If the EOB is received after tax filing, then you must file an amended return to claim the expense less insurance as a deductable (we've taken advantage of IRS rules that you can file an amended return for a missed deduction - and avoided having to list the insurance reimbursement as line 21 income).
Example 7: On 12/30/00 visit the allergy doctor for a shot. We know charge will be $30, 24 paid by insurance and 6 by us. As this is a year we are not deducting medical, and will deduct next year, we want the payment made next year. So we do nothing until the EOB is received next year and then make the following entries
12/30 expT80/2001 Dr Bones 2/5/01 30 30 12/30 insT80/2001 Dr Bones 2/5/01 24 6 12/30 [check]/2001 Dr Bones 2/5/01 1235 6 0
Case Summary: As you would expect, the entries are similiar to those made by someone itemizing every year; the difference is that you are deciding which year to make the payment.
When making a payment for a prior year service include payment year class on the entries for that service. Prior to year end (while there is still time to make payments), examine accounts with nonzero balances and use reports to find providers service dates with missing payments or insurance reimbursements in the tax calendar year. If payment was made but no insurance reimbursement received, add an ins...Estimat entry for correct tax deduction calculation. If payment was not made and medical expense is being deducted this year, make a payment, record the payment and, if no insurance reimbursement, add an ins...Estimat entry. If payment was not made and medical expense will be deducted next year, add a class to move expense and insurance (if any) to the next calendar year.
Case 3: A deduction not claimed. In December 2000, on a trip, saw a doctor somewhere, paid $100 cash, and forgot about it (cash was likely recorded as "misc"). Next year, June, after having filed taxes, you receive an EOB and a check for $80. The entries are:
12/25 expT80 Dr OverThere 12/25 100 100 12/25 [cash] Dr OverThere 12/25 100 0 12/25 insT80 Dr OverThere 5/20/01 80 -80 12/25 [check] Dr OverThere 6/02/01 80 0
If you itemized deductions for 2000, or if you would have itemized deductions with this additional $20 payment, and want a tax refund you have to file an amended return for 2000.
Case 4: Moving income to next year. On 12/30/00 visit the allergy doctor for a shot. We know charge will be $30, 24 paid by insurance and 6 by us. And we are deducting medical expense for the year 2000. Pay the full $30 charge 12/30; the entries are:
12/30 expT80 Dr Bones 12/30 30 30 12/30 [check] Dr Bones 12/30 1234 30 0
When the insurance reimbursement is received, enter:
12/30 insT80/2001L21 Dr Bones 2/5/01 24 -24 12/30 [check] Dr Bones 2/10/01 24 0
Sooooo the full $30 is year 2000 medical deductible. The $24 insurance reimbursement in 2001 is for medical expense deducted in 2000 and, thus, goes on 1040 line 21, adding to your 2001 AGI. Hopefully you have a good reason for doing this.
C O M M E N T S --------------------------------------------------------
A comment on copayments: ---------
Medical providers offer prompt, professional services. For any substantive copayment not paid at the time of service, unless you are delaying payment to next year for tax purposes, send the copayment when you receive the insurer's EOB. It has already been a month since the provider did their thing; don't require the cost of a billing and an additional months delay before copayment.
A comment on "grouping" deductions: ----------
Schedule A itemized deductions can sometimes be increased by grouping as many deductions as possible into alternate years, or every third year, and taking the standard deduction in the intervening years (this strategy is not universally rewarding, but you should be aware of the possibility).
Assume $8000 in itemized deductions each year and that the standard deduction is $7000. Every two years your total deductions are 2 x 8000 =3D 16000. Now move $2000 of deductions from one year to the other: one year's deduction changes 8000+2000 =3D 10000, the other year's deduction changes to 8000-2000 =3D 7000. Shouldn't that be 6000? No, for that year the standard deduction is taken. The two years deduction total is 10000+7000 =3D 17000; gaining $1000 in deductions.
Similar logic applies if itemized deductions are less than the standard deduction and enough deductions can be grouped into one year to exceed the standard deduction for that year. Deductions that might be grouped include charitable, some state taxes (if you pay estimated taxes mail the total estimated payment for next year the last day the post office is open this year), some medical payments, and property taxes (if a fee is charged for a late payment and you save more than that fee on federal and state taxes - it's still a good deal).
A comment on Grouping Medical Deductions: ----------
Only allowable medical expense that is in excess of 7.5% of the AGI can be deducted. And then only if deductions are itemized, as opposed to taking the standard deduction.
Suppose deductions are itemized every year; deductible medical expense is $1200 each year, 7.5% of the AGI is $1000. Thus the medical deduction is 1200-1000=3D200 each year. Moving $300 from one year to the other leaves no medical deduction for one year, but $500 for the other; the two year total has increased from 200+200=3D400, to 0+500=3D500.
Given the same medical expense and AGI, consider the case where deductions are itemized every other year. Now the medical deduction is 0+200=3D200, even though medical expense exceeded 7.5% AGI both years. Any amount moved to the year deductions are itemized will increase the total itemized deductions.
Similar logic applies if medical expenses are less than 7.5% of AGI. If deductable medical expense is grouped into one year to exceed 7.5% AGI and deductions are itemized that year, then the itemized deductions have been increased.
Medical deductions are moved between years by selecting the payment date. Paying at service date for this year's deduction or waiting for the insurance cycle, then the providers billing cycle, then the time till due, to delay till next year. Some medical procedures can be scheduled for tax benefits, all other things being equal. For example, schedule annual exams for early January and late December, with no exam the following year - it's still an exam about every twelve months but both exams are paid in the same year.
A comment on 1040 Line 21: ----------
Recording medical insurance reimbursements for medical expense deducted in a prior year on 1040 Line 21 can, in some cases, result in those amounts being taxed at approximately double (DOUBLE) your marginal tax rate. Think of it this way; the deduction last year that saved $100 of taxes can add almost $200 to next year's taxes. Not good.
What happens is: Reporting such insurance reimbursements as income increases the AGI on both state and federal returns. And increasing the AGI is only bad tax news. If Social Security is being received, there are income levels where every dollar increase in AGI increases taxable SS income by $.85. Report $1 of insurance and pay taxes on almost $2. Even without Social Security, there are unfortunate tax consequences. AGI is input to: IRA Deduction Worksheet, Student Loan Interest Deduction Worksheet, Deductions for Exemptions Worksheet, Capital Gain Tax Worksheet, ... Further, medical and some other deductions, are reduced by percentages of your AGI. For many (most?) people, having the AGI increased by medical insurance reimbursements is not a good idea.
What to do about it? Don't claim medical expense as deductible that will be reimbursed by insurance in a later year. Even if you paid it, don't claim it. If you paid in full at time of service, $100 for example, and expect an $80 insurance reimbursement next year, claim only a $20 deduction, not the full $100 that you paid.
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Reply to
bearcat77070
Didn't read the whole thing, but caught the gist of the very extensive work done in Quicken.
TOO BAD! Why not use Quicken Medical Expense Manager (latest version 2.1.2.10 for Vista)?
Great record keeping. Easy reporting. Good query tools. Generates dispute letters. Allows for attachment of scanned documents. Holds all important text notes date/time stamped to record when I spoke with whom about what, both as to the financial side and the medical side.
See
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> I'm reposting Richard's write-up here because I'd like to make > reference to it with some questions I have and I can't seem to find a > copy googling for it to refer people to who might be able to help me. > > > Thanks again Richard for writing this up! > > > > > Part 1 of 2 > > Using Quicken to Track Medical Expense and Insurance > Reimbursements > > ------------------------------------------------------------------- > > R Weaver >
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> > > 2002.11.21 > editorial > 2002.07.28 > Added: medical expenses paid with pre-tax money are not > deductable. > (a generalization of the 2001.5.6 MSA edit) > 2001.12.11 > Added: more detail re. secondary carrier > 2001.10.21 > Revised categories. > "exp" and "ins" categories have been revised, "supp" > categories were deleted. Thus insurance coverage on > non-deductable medical expense can be recorded in the same > way as for deductable expense. > Added: "When There Are Individual Limits" > 2001.6.20 > Added: interest to federal tax refund example > Added: "sequence of submissions" to secondary carrier > 2001.5.6 > Added: medical expenses paid from MSA account are not deductable > 2001.3.21 > Added: Secondary carrier > Added: Medicare > Added: determining itemized medical tax deduction, see "T A X E S" > > N O T E S > -------------------------------------------------------------- > > The word "deductable" is used in two contexts: "tax deductable" > (reportable on tax forms) and "insurer deductable" (what you must pay > before insurance reimbursements begin). > > And "tax deductable" means only reportable on tax forms; a tax > deduction may or may not result. > > Minor editorial improvements are not noted in the list of edits above. > > S U M M A R Y > ---------------------------------------------------------- > > Medical expenses can be substantial; my requirements are to: > > -- Easily verify a service provider's billings > > -- Verify that medical providers are being correctly paid, either by > insurers or by myself > > -- By inspection (i.e, by sight and without any, or with very > little, > work) of Quicken registers and reports, determine that > anticipated > insurance reimbursements are, eventually, correctly paid, either > to > the provider or myself. My insurance carriers reimburse 100%, > 80%, > or some random %, depending on the service. > > Tracking insurance reimbursements is not just a favor to medical > providers, there are financial implications for yourself. 1) > insurance companies may have cutoff dates past which claims will > not be accepted; you want to be sure that all claims are filed > and > prompt less efficient providers to correct and refile when claims > are rejected. 2) tax reporting is dependent on the year > copayments > are paid and can be dependent on the year insurance > reimbursements > are received. 3) Medicare imposes a fee on late filings. 4) > and, > of course, if the insurance carrier doesn't pay - you likely > will. > > -- Verify that insurance deductible (the amount that must be paid > each > year before any insurance reimbursements will be made) is > correctly > calculated (yes, one of my carriers has even gotten that wrong). > > -- Identify the medical expenses reportable on income tax forms > ("tax > deductable"). See IRS Publication 502 "Medical and Dental > Expenses". > > If your medical transactions are few and the above is but a few > minutes > work, then what follows is not necessary for you (although my method > does not add significant work when entering medical transactions). > Should you, however, have many medical transactions each year, > involving > multiple doctors, hospitals, and labs, then you may find my method of > some interest. > > I've developed this method from 1995 through today (late 2001). > Medical > expenses tracked for those years have ranged from $22,000 to $42,000 > per > year. My Quicken medical liability accounts have over 4,000 entries > for > those years; an average of 700/year. It usually takes 4 entries for a > service (expense, insurance write-off, insurance payment, my payment) > so > that's 175 medical services/year. Every other day, right? > > Success has not been 100%; there are billing errors I've never gotten > corrected, insurance reimbursements I've never received, charges I've > never understood - but I've come close. > > My method is: > > 1. For recording medical transactions: > > -- a liability account for each medical provider > > "account for each" is the principal. Pragmatics are otherwise. > Whatever is easiest, while still able to answer questions by > inspection. I keep El Camino Hospital, El Camino Radiologists, > El Camino GI, ... all in the same account. I also have a "Various > Medical" account for providers that are used only a few times > each > year (and to which I move entries for providers no longer used, > keeping the number of accounts down). > > trivial hint: In the description field for each medical account, > put the billing phone number (and hours) so that it's on your > screen when you want to call about the account. > > -- recording, as expense, the total cost of a medical service on the > service date (as opposed to recording the amount billed to me on > the date billed) > > -- recording all payments to a provider with the service date (as > opposed to the date payment was made) > > -- recording all activity for a provider in the provider's account > (for example: an insurance reimbursement sent to me is recorded > in > the provider's account, followed by a transfer to the account I > deposited the reimbursement in) > > -- categorizing insured medical expenses by the expected insurance > reimbursement percentage. Insurance reimbursements are > categorized > matching the expense categorizations. > > categorizing medical expenses as tax deductible or not. > > Examples of categories are (my complete list is in the later > details) > > expN expense not insured, not deductible > expT tax expense not insured, tax deductible > expT80 tax exp. insured, anticipated 80% insurance > reimburse. > insT80 tax insurance reimbursement, 80% of expense less > any write-off > > Note: Insurance reimbursements are "expense", not "income". > categories. They are not part of taxable income (if you > are > careful; see the later section on taxes), they serve only > to > offset expense. They are "negative expense", if you will. > > -- using class to identify tax deductable amounts that are paid in a > different year than the service date year. > > 2. Utilizing the register for a providers account to verify the > provider's statement. > > This can be done by inspection as each service date will, when all > transactions have been entered, show a zero balance in the Quicken > register. Well, usually by inspection -- some provider's statements > are > so convoluted (and so infrequent) that verification is a major > project. > (Verification is an important step; we have been billed for services > on > dates when we were out of town, we have been billed for -- and our > insurance initially reimbursed for -- services performed on other > people. Noting medical services in your calendar, diary, Day- > Timer, ... > provides a good reference) > > An example of the entries in Dr. Bones register for one service is: > > date category Payee memo Increase Decrease > Balance > > 1/01 expT80 Dr Bones 300 > 300 > 1/01 insT80wo Dr Bones 100 > 200 > 1/01 insT80 Dr Bones 2/10 160 > 40 > 1/01 [check] Dr Bones 3/05 1234 40 > 0 > > On 1/01 there was a service, tax deductable, cost $300, for which an > 80% > insurance reimbursement was anticipated. On 2/10 the insurer: > accepted > only $200 of cost ($100 write-off) and processed a $160 reimbursement > (80%) to Dr Bones. On 3/05, I wrote check 1234 for $40, the balance > for > that service, to Dr Bones. > > 3. Utilizing Quicken reports (examples later) to: > -- check insurance reimbursements > -- identify and age unpaid services > > > T H E A C C O U N T R E G I S T E R > ------------------------------- > > I begin with a small scenario and, in a series of steps, refine the > Quicken entries to what I find to be an adequate methodology. I > actually went through a similar process, revising my early medical > entries three times. The steps presented here are intended to be a > logical progression; my own experience was less organized. > > -------------------------- > > The scenario (year omitted from dates, mm/dd): > > 1/01 see Dr Bones, charges are $300. Anticipate 80% insurance. > > 1/31 receive stmt from Bones > 1/01 service $300 > balance $300 > > 2/01 see Dr Bones, charges are $100. Anticipate 80% insurance. > > 2/02 see Dr Bones, no charge > > 2/10 letter from insurance company re 1/01: $200 of expense meets > annual deductible. For remaining $100, 80% ($80) payment has > been sent to Dr Bones. > > 2/28 receive stmt from Dr Bones > prior bal $300 > 2/01 service 100 > 2/12 ins pay 80- > balance 320 > > 3/05 send Dr Bones $220 payment (the balance of 1/01 service) > > 3/07 see Dr Bones, charges are $150. Bones asks for immediate payment > so I use Visa credit card to pay $150. Anticipate 80% insurance. > > 3/09 letter from insurance company re 2/01: Insurer's rate for service > is $90 and is covered at 100%. Doctor has to absorb $10 > reduction. > Check for $90 enclosed and made out to me (not Doctor). Deposit > check to my checking account. > > 3/10 stop at Dr Bones office to pick up WhoopeeVit, expense $10. > Bones > recommends for hangnails. Pay immediately, using credit card. > > 3/15 see Dr Bones, charges are $200. Anticipate 80% insurance. > > 3/31 receive stmt from Dr Bones > prior balance $320 > 3/06 paid 220- > 3/07 service 150 > 3/07 paid 150- > 3/09 writeoff 10- (Bones got the EOB and knows about the > $10 reduction, but I got the $90 > check) > 3/10 WhoopeeVit 10 > 3/10 paid 10- > 3/15 service 200 > balance 290 > > -------------------------- > > I know that I must have a liability account for each provider, > recording > both the provider's charges and all payments to meet my goal of using > the Quicken register to verify the provider's billing. > > Now I can record the scenario's transactions. I will use only one > category, "expense: medical". The posts are to a liability account > for > Dr Bones (I've not shown the other side of transfer entries). "Date" > is > the date of service or payment. This is about how I first started > using > Quicken for medical services. > > date category Payee memo Increase Decrease > Balance > > 1/01 medical Dr Bones 300 > 300 > 2/01 medical Dr Bones 100 > 400 > 2/02 medical Dr Bones 0 > 400 > 2/10 medical Insurance 80 > 320 > 3/05 [check] transfer fr chk 220 > 100 > 3/07 medical Dr Bones 150 > 250 > 3/07 [visa] transfer fr visa 150 > 100 > 3/09 medical Insurance write-off 10 > 90 > 3/09 medical Insurance 90 > 0 > 3/09 [check] transfer to chk 90 > 90 > 3/10 medical Dr Bones WhoopVit 10 > 100 > 3/10 [dis] transfer fr dis 10 > 90 > 3/15 medical Dr Bones 200 > 290 > > Well, it is all there. But I can only answer one question, "Is the > provider's statement correct?". To answer questions about "have > insurance reimbursements been made?", "how much is tax deductible", > and > "have we paid our part", by inspection, I need to make some changes. > > Instead of using transaction date to record entries, I will record all > entries by service date. > > The memo field is used for an audit trail. For expense and insurance > entries, record the date of the source document (usually the EOB or > provider's statement). For check payments, record the check date and > the check number (the check number field is visible in the check > register but not in the medical account side of the Quicken transfer; > having the check number in the memo field is convenient when comparing > a > medical account register to a provider's statement or when printing a > copy of the medical account register to send to the providers billing > dept. - sometimes an easy way to resolve problems). For credit card > payments, record the date of payment. And, of course, record anything > else that might help. > > Use a consistent style for memo date entries: mm/dd if the year is > the > same as the service date year, mm/dd/yy, if the year is different. > Makes it easy when reviewing services where payment was made in a > different year (see Taxes, below). > > The revised entries, recorded by service date, are: > > date category Payee memo Increase Decrease > Balance > > 1/01 medical Dr Bones 2/10 300 > 300 > 1/01 medical Insurance 2/10 80 > 220 > 1/01 [check] transfer fr chk 3/05 1234 220 > 0 > 2/01 medical Dr Bones 3/09 100 > 100 > 2/01 medical Insurance 3/09 write-off 10 > 90 > 2/01 medical Insurance 3/09 90 > 0 > 2/01 [check] transfer to chk 3/09 90 > 90 > 2/02 medical Dr Bones 2/02 0 > 90 > 3/07 medical Dr Bones 3/07 150 > 240 > 3/07 [visa] transfer fr visa 3/07 150 > 90 > 3/10 medical Dr Bones WhoopVit 10 > 100 > 3/10 [dis] transfer fr dis 3/10 10 > 90 > 3/15 medical Dr Bones 3/15 200 > 290 > > I can now determine the service dates contributing to final account > balances by inspection. Eventually every service date will end with a > zero balance. Service dates that have a different balance than at the > end of the prior service, have an outstanding balance that is part of > the final balance. > > - 1/01 is what I want each service date to eventually look like: > service followed by payments, ending with a zero balance. > > - 2/01 has not been fully paid; the 90 ending balance is not the > same > as the prior (0) balance. > > - 3/07 is paid; the 90 ending balance is the same as the prior > (2/02) balance. > > So, by inspection I can see that for 2/01 I owe Dr Bones $90 (the > insurance reimbursement that was sent to me) and for 3/15 I am waiting > for the insurance reimbursement. > > But have all the anticipated insurance reimbursements been made? For > example: while 3/07 is paid from the providers view, does the insurer > owe me money? And how much is tax deductible? > > Now I am ready to discuss categories. Instead of just "medical", I > will > categorize medical expense entries by the kind of insurance > reimbursement expected and whether or not tax deductible. Similar > categories will be used for insurance reimbursements. > > Some "exp" and "ins" category names are constructed from 3 parts: > "exp" or "ins" - expense or insurance reimbursement > "T" or "N" - tax deductable or not > blank, 80, 100, var > - the 80,100,var indicate insurance percentages > (var=various). You should choose percentages > meaningful for your particular carriers. > Just add to your category list the combinations you are likely to use. > > My list of "expense:medical" subcategories is: > > Expense > Medical > empcon tax employee "contribution" to company medical > plan > expTdedA tax insurer A deductible (replace "A" with name) > expTdedB tax insurer B deductible (replace "B" with name) > expTdedoffset tax Offsets any duplicate expTded... > milageT tax milage deduction. See 1040 for rate/mile > milageoffset offsets milage deduction > LTHC tax Long Term Health Care Insurance premium > LTHCReimbu tax LTHC premium reimbursement > MedicareB tax Medicare B insurance premium > MedicareBReim tax Medicare B reimbusement (some employers do) > otherreimb tax other reimbursements (provider write-offs of > small balances are an example) > rxcopay tax Rx copayments, there is no insurance > reimburse. > > expT tax not insured, tax deductible > expN not insured, not deductible > > expT80 tax exp. insured, anticipated 80% ins. reimburse. > insT80 tax insurance reimbursement, 80% of expense > insT80wo tax insurance write-off, remainder will be at 80% > insT80Estimat tax ins to be paid, we hope (see tax section) > > expN100 not deduct., anticipated 100% ins. reimburse. > insN100 insurance reimbursement, 100% of expense > > expT100 tax exp. insured, anticipated 100% ins. > reimburse. > insT100 tax insurance reimbursement, 100% of expense > insT100wo tax insurance write-off, remainder will be at > 100% > ins100Estimat tax ins to be paid, we hope (see tax section) > > expTvar tax exp. insured, anticipated various% ins. pmnt > insTvar tax insurance reimbursement, various% of expense > insTvarwo tax insurance write-off, remainder will be at var > % > insTvarEstimat tax ins to be paid, we hope (see tax section) > > Not as long a list as it appears - once you understand the pattern for > "exp" and "ins" categories - and that your category list need include > only those you will use. > > You may have additional or different medical categories, taxable or > not, > depending on your particular case and your insurer's reimbursement > schedules. The "tax" indication of some of the above may not be > correct > for your particular case. Read IRS pub 502. For some plans LTHC > reimbursement may be classified for tax purposes as Miscellaneous > Income > (1040 line 21). Read IRS pub 502 again. Read your 1099s. Read this > paragraph again. > > While some categories are coded as tax deductible, what is really > deductible is the net - what you pay, expense minus insurance > reimbursements minus other payments. And it is deductable in the year > paid, not the service year (Quicken classes are used to get correct > tax > totals for a year, see below) > > In the revised example below the 1/01 entry has been divided into two > entries, one for the insurance deductible part and one for the 80% > paid > part. This division would be done when the insurance EOB is received, > not at the time of service (at the time of service, or from the > medical > provider's statement, it would not be known which submitted claims > would be used to satisfy the insurance deductible). > > All entries now have "Dr Bones" as Payee. This is necessary for the > summary reports by payee that will be used when matching expense to > insurance reimbursements. We still still know which entries are > insurance reimbursements (from category) and can, if ever necessary, > determine which insurer by reference to the EOB (we did put the > statement date in the memo field). > > The revised entries, with new categories, are: > > date category Payee memo Increase Decrease > Balance > > 1/01 expTdedA Dr Bones 2/10 200 > 200 > 1/01 expT80 Dr Bones 2/10 100 > 300 > 1/01 insT80 Dr Bones 2/10 80 > 220 > 1/01 [check] Dr Bones 3/05 1234 220 > 0 > 2/01 expT80 Dr Bones 3/09 100 > 100 > 2/01 insT100wo Dr Bones 3/09 10 > 90 > 2/01 insT100 Dr Bones 3/09 90 > 0 > 2/01 [check] Dr Bones 3/09 90 > 90 > 2/02 expT80 Dr Bones 2/02 0 > 90 > 3/07 expT80 Dr Bones 3/07 150 > 240 > 3/07 [visa] Dr Bones 3/07 150 > 90 > 3/10 expN Dr Bones WhoopVit 10 > 100 > 3/10 [dis] Dr Bones 3/10 10 > 90 > 3/15 expT80 Dr Bones 3/15 200 > 290 > > That's the final register, the basis for everything that follows. > > > C H E C K I N G I N S U R A N C E R E I M B U R S M E N T > -------- > > How do I check, other than by going through each provider's account > service date by service date, that all insurance reimbursements have > been made? I use three (memorized) Quicken Summary reports (for 100%, > 80%, various%) > > -- Select all accounts > > -- For the 100% report: categories expN100, expT100, insT100wo, > insT100, insN100 > For the 80% report: categories expT80, insT80wo, and > insT80. > For the various% report: categories expTvar, insTvarwo, insTvar, > and otherreimb > -- define rows to be payee > -- define columns to be category > > If you have been making ins...Estimat entries in anticipation of tax > calculations, you likely want to include those categories as well. > > Assume today's date is 5/31. I expect most services through 3/31 to > have been processed by the primary insurer. > > The 100% report for the example, through 3/31, shows > > INC/EXP INC/EXP INC/EXP ... INC/ > EXP > EXPENSE EXPENSE EXPENSE ... > EXPENSE > Medical Medical Medical ... > Medical > Payee Desc expT100 insT100 insT100wo... > total > > Dr Bones 0 90 10 > 100 > > Curiously there is a 100% insurance reimbursement but no corresponding > expense. Looking at Dr Bones register, above, for insT100entries I > find > 2/01 > > 2/01 expT80 Dr Bones 3/09 100 > 100 > 2/01 insT100wo Dr Bones 3/09 10 > 90 > 2/01 insT100 Dr Bones 3/09 90 > 0 > 2/01 [check] transfer to chk 3/09 100 > 100 > > where I anticipated 80%, but payment was actually 100%. I should have > caught that when entering the insurance reimbursement (but this > example > is better since I didn't). Deciding that I agree with the insurer > (else > I would call), 2/01 is corrected to > > 2/01 expT100 Dr Bones 3/09 100 > 100 > 2/01 insT100wo Dr Bones 3/09 10 > 90 > 2/01 insT100 Dr Bones 3/09 90 > 0 > 2/01 [check] transfer to chk 3/09 100 > 100 > > Running the 100% report again > > INC/EXP INC/EXP INC/EXP ... INC/ > EXP > EXPENSE EXPENSE EXPENSE ... > EXPENSE > Medical Medical Medical ... > Medical > Payee Desc expT100 insT100 insT100wo... > total > > Dr Bones 100 90 10 > 0 > > and I now know that, through 3/31, all expected 100% insurance > reimbursements have been made for all medical accounts. > > Running the 80% report, through 3/31 (and after the correction of the > 2/01 entry): > > INC/EXP INC/EXP INC/EXP ... INC/ > EXP > EXPENSE EXPENSE EXPENSE ... > EXPENSE > Medical Medical Medical ... > Medical > Account Desc expT80 insT80 insT80wo... > total > > Dr A 100 72 10 > 18 > Dr B 0 0 0 > 0 > Dr Bones 450 80 > 0 ... > > For the time period covered by this report, 80% of Dr. A's expenses > (those expenses less write-off for which 80% insurance reimbursements > were anticipated) have been reimbursed by the insurer. Dr B had no > "80%" expenses. > > For Dr. Bones I expect insT80 to be ($450 - 0) x 80%, or $360, but I > only have $80. There are $360 - $80, or $280, of anticipated > insurance > reimbursements. This report would prompt me to make some inquiries > about the aging insurance obligation for Dr. Bones. > > The various% report does not have a simple test; its results must be > accepted or investigated on a claim by claim basis. > > > W H E N T H E R E A R E I N D I V I D U A L L I M I T S > ------- > > Insurance carrier's plan can contain limits/maximums, such as: > 250/750 deductable for individual/family > 2000/5000 maximum out-of-pocket for individual/family > > If you choose to track these limits/maximums, you will need: > - separate accounts for each doctor/patient combination. For > example, instead of "Dr Bones" account, you will need > "Dr Bones His" and "Dr Bones Hers" accounts. > - separate categories for transactions not recorded in an > individuals > medical accounts. Principally "rxcopay" becomes "rxcopayhers", > "rxcopayhis", "rxcopayson", etc. > > The obvious reports, selecting accounts and categories, can then be > used > to track limits. > > "Class" can be used instead. I choose to use separate > accounts/categories as, for me, it is the minimal effort when entering > transactions. > > > C H E C K I N G A G I N G U N P A I D S E R V I C E S > ------------ > > Use a Quicken Summary report, select medical accounts, payee (rows), > months (columns), and all categories, to identify aging unpaid > services > For example: > > Medical Payees: net by Month > 1/1/96 Through 4/14/96 > 4/14/96 Page > 1 > Selected Accounts > > OVERALL > Payee Description 1/1/96 2/1/96 3/1/96 4/1/96 > TOTAL > > Dr Dear -15 15 0 0 > 0 > Dr Doe 0 -20 0 0 > -20 > Dr Cat 0 0 -238 -1,500 > -1,738 > > For Dr Dear it appears that $15 in 1/96 expenses was recorded as paid > in > 2/96, an error in not using the service date for the payment. > Inspection of the register for Dr Dear's account will verify this. > The > payment entry dates can then be corrected. > > Dr Doe, for 2/96, had $20 more in expenses than in payments. At 3 > months old and a small amount it is likely a service partially paid by > insurance with the balance not yet paid by me. > > Dr Cat shows "in progress", recent services likely have not yet been > billed to me or processed by the insurer. No action is required. > > > A useful Quicken Graph: select net worth graph > medical accounts > > This graph shows medical account balances for the selected range of > months. Current, and recent, months have large "in progress" balances > while older months have smaller, eventually zero, balances (an effect > of > recording payments by service date). That account balances are, or > are > not, aging is easy to see. > > > M E D I C A R E > ------------------------------------------------------- > > Assume a service of $60, Medicare allowed amount $50, Medicare > payment of 80% of 50 = $40. The entries depend on whether or not the > provider accepts Medicare Assignment (shown on the EOB). > > Accepts Assignment (and Medicare sends check to provider): > date category Payee memo Increase Decrease > Balance > > 7/17 expT80 Dr Skull 8/11 60 > 60 > 7/17 insT80wo Dr Skull 8/11 10 > 50 > 7/17 insT80 Dr Skull 8/11 40 > 10 > 7/17 [check] Dr Skull 8/18 1234 10 > 0 > > Does Not Accept Assignment, paid in full at time of service (and > Medicare sends check to you): > > 7/17 expTvar Dr Skull 7/17 60 > 60 > 7/17 [check] Dr Skull 7/17 1234 60 > 0 > 7/17 insTvar Dr Skull 8/11 40 > 40 > 7/17 [check] Dr Skull 8/11 40 > 0 > > > Part 2 of 2 > > S E C O N D A R Y I N S U R A N C E C A R R I E R S > ---------------- > > For a specific claim the primary carrier is the carrier that processes > the claim first, the secondary carrier processes it second. We think > of > our carrier "ABC HMO" as our primary carrier, or "DEF Co" as our > secondary - but those designations are for a specific time and not > fixed > for the year (and that is why the "expded..." categories are for > specific carriers rather than labeled expdedPri, expdecSec). Suppose > ABC HMO is your only, thus primary carrier, and you turn 65 in June. > June and after Medicare is your primary and ABC HMO is now your > secondary. But if your spouse is not yet 65, then ABC HMO is still > primary on spouse's claims. > > For a secondary carrier, record: > > - amounts applied to that carrier's deductible (expded...). It is > important to submit claims to both carriers until deductibles are > met, even when the secondary carrier will make no reimbursement on > the claim, so that when there is a later claim that should result > in > reimbursement, that claim does not go to meet deductible instead. > > Also enter an expTdedoffset for the same amount as the second > carrier's expded... entry duplicates expense already recorded for > the primary carrier. > > - any additional insurance reimbursement for the claim. Useing the > "insTvar" category, or other categories as appropriate. > > Examples: > > For use in the following examples, the original Dr Bones 1/01 exp... > and > ins... transactions are: > > date category Payee memo Increase Decrease > Balance > > 1/01 expTdedA Dr Bones 2/10 200 > 200 > 1/01 expT80 Dr Bones 2/10 100 > 300 > 1/01 insT80 Dr Bones 2/10 80 > 220 > > > Suppose we submit that 1/01 $300 claim as the 1st claim of the year to > a > secondary carrier with a $250 deductible. That carrier applies $250 > to > deductible and makes no other reimbursement. We record the 2nd > carriers > deductible and offset it so as not to affect Dr Bones totals. The > additional entries are: > > 1/01 expTdedB Dr Bones 4/20 250 > 470 > 1/01 expTdedoffset Dr Bones 4/20 250 > 220 > > Suppose we submit that 1/01 claim as the 1st claim of the year to a > secondary carrier with a $150 deductible and that carrier calculates a > $120 benefit, reduces it by the $80 already paid by Medicare, makes a > $40 reimbursement. As before, we record the deductible and offset. > The > additional insurance reimbursement is recorded as "insvar" (we have > already recorded all of the expense with the entries for the primary > carrier). The additional entries are: > > 1/01 expTdedB Dr Bones 4/20 150 > 370 > 1/01 expTdedoffset Dr Bones 4/20 150 > 220 > 1/01 insTvar Dr Bones 4/20 2nd carrier 40 > 180 > > Later in the year, after deductibles have been met, a $40 > reimbursement > from a secondary carrier could be entered with just: > > 4/01 insTvar Dr Bones 9/04 2nd carrier 40 > 180 > > My secondary states "If a doctor doesn't accept assignement, we allow > a > charge of up to 115% of the Medicare allowed charge and will pay the > difference between the Medicare payment and 80% of the allowed charge" > (so that my copayment is at most 20%). Consider a doctor office vist, > $100, doesn't accept Medicare assignment, and I pay $100 at the > office. > Medicare allows $87 and reimburses me $71. In this example, 115% of > 87 > is more than 100 so the full amount is allowed, and my secondary will > reimburse $9 for a total reimbursement of $80 and copayment of $20. > > After the office visit I enter: > 1/01 expT80 Dr Bones 1/01 100 > 100 > 1/01 [check] Dr Bones 1/01 1234 100 > 0 > > When the Medicare EOB is received: > 1/01 insT80 Dr Bones 2/12 Medicare 71 > -70 > 1/01 [check] Dr Bones 2/17 71 > 0 > > When the secondary's EOB is received: > 1/01 insT80 Dr Bones 3/18 Secondary 9 > -9 > 1/01 [check] Dr Bones 3/24 9 > 0 > > > Sequence of claims submitted to secondary re carrier deductables: > > In general (I've not surveyed how all secondary carriers work - thus > the > weasel words) the secondary calculates what the secondary would > reimburse and then reduces that by the amount reimbursed by the > primary. > Suppose that both carriers have a $100 deductable and you have January > and February claims of $100 each. If claims are submitted in calendar > sequence to both carriers, then > > 1. Jan claim to primary: applies deductable, reimburses $0 > 2. Jan claim to secondary: applies deductable, reimburses $0 > 3. Feb claim to primary: reimburses $80 > 4. Feb claim to secondary: reimburses $0 (as primary has reimbursed > $80) > > But change the sequence, submitting the February claim as the first > claim to the secondary: > > 1. Jan to primary: applies deductable, reimburses $0 > 2. Feb to primary: reimburses $80 > 3. Feb to secondary: applies deductable, reimburses $0 > 4. Jan to secondary: reimburses $80 (as primary has reimbursed $0) > > Thus each carrier pays on claims the other carrier applied to > deductable. > > To make this happen: > > 1. At the beginning of year tell providers not to submit to secondary > (better, tell them you have NO secondary). > > 2. When you have recieved EOBs from primary showing that deductable > has been met, tell providers to again submit to secondary. > > 3. When you have received EOBs from secondary showing that deductable > has been met, submit those claims withheld at step 1. > > > M I S C. S T U F F > --------------------------------------------------- > > That insurance deductibles have been correctly met can be checked with > category totals. > > Milage for medical purposes is generally tax deductible. The register > provides a count of trips to Dr Bones (if you were curious why the > 2/02 > "no charge" was entered in the register, now you know) and at year end > I > make two entries in Dr Bones register (these could be in another > register, but I prefer to see them in the same register -- there is > less > chance for error). > > date category Payee memo Increase Decrease > Balance > > 12/31 milageT Dr Bones 6 trips, 20m 10.80 > 10.80 > 12/31 milageoffset 10.80 0 > > With the two entries, Dr Bones account balance is unchanged yet tax > reports will show the 10.80 deduction. And when reviewing Dr Bones > register I know the milage deduction has been entered (I don't have to > search some other account). > > What if I write one check for two or more service dates. Or one > insurance reimbursement covering two or more? I handle these in any > of > the following ways: > > -- Suppose check number 1234 is for 5/15 and 5/25 services. > In the checking account, I record two entries with duplicate > check > numbers (Quicken allows this, after a warning). And in the > earliest date I put the total amount in the memo field. > > date category Payee memo Inc Dec > Bal > 5/15 [Bones] 1234 transfer 7/2 1234 total $a+b $a > 5/25 [Bones] 1234 transfer 7/2 1234 $b > > Thus each service date has a complete record of payments. At > check > reconciliation time, the two checks 1234 are listed together, > their total matching to 1234 on the bank statement. > > -- If a medical account regularly has multiple transactions in one > month and a single billing (example: an allergy doctor) then I > enter a monthly payment using the last service date for each > month > and indicate in the memo field both the service dates and the > transaction date "6/10 1234 5/1,8,15,23,30". Such an account > shows a zero balance only at the last transaction of each month. > > -- If an account has an immediate payment for every service > (example: > an account used for prescriptions) then I submit one insurance > claim for each month and, as before, enter the insurance > reimbursement using the last service date and recording both the > range of service dates and the transaction date in the memo > field. > The prescription account register is different from most other > registers: each service is immediately followed by a credit card > transfer payment and each insurance reimbursement is immediately > followed by a transfer of that reimbursement to checking. > > Note: the prior paragraph was written when I paid the full > amount > for prescriptions and submitted insurance claims. Now I make > only a copayment. That payment is recorded in the appropriate > charge, cash, or checking account, category:RxCoPay, and no > other > entries are needed. > > > T A X E S > -------------------------------------------------------------- > > I AM NOT A TAX PROFESSIONAL (so I might/likely have it wrong). > I am not a tax professional (SO I MIGHT/LIKELY HAVE IT WRONG). > THIS IS MY READING OF IRS PUBLICATIONS AND HOW I DO IT. > THIS IS NOT COMPLETE; THERE ARE TOPICS NOT ADDRESSED > -- THE AUTHORITATIVE SOURCE IS THE IRS -- > > There is a lot here about taxes rather than about Quicken. I can't > separate the two; the Quicken entries are because of taxes so I end up > describing both. > > If you are not itemizing deductions because the standard deduction is > "better" read the "Comment on Grouping Deductions". > > If you are not itemizing medical deductions because of the 7.5% AGI > restriction, read the "Comment on Grouping Medical Deductions". > > If after reading those sections you are still not itemizing medical > expense then skip the rest. > > If you, or your spouse, will be age 65 next year, observe that > checking > boxes on 1040 line 37 increases your standard deduction; thus in the > current year you need to be comparing next year's estimated itemized > deductions to next year's increased standard deduction as you may want > to begin grouping deductions this year. > > Excerpts from IRS pub 502: > > What Expenses Can You Include This Year? > > You can include only the medical and dental expenses you paid > this > year, regardless of when the services were provided. > > You can include medical expense your charge to your credit card > in > the year the charge is made. It does not matter when you > actually > pay the amount charged. > > You cannot deduct qualifed medical expenses as an itemized > deduction if you pay for them with a tax-free distribution > (Cafeteria plans) (also see Medical Savings Account, MSA, > Pub 969) > > Insurance Reimbursement > > You must reduce your total medical expense for the year by all > reimbursements for medical expense that you receive from > insurance or other sources during the year. > > If you are reimbursed in a later year for a medical expense you > deducted in an earlier year, you must report as income [1040 > line > 21] the amount you received from insurance or other sources that > is equal to, or less than, the amount you previously deducted as > medical expense. However do not report as income the amount ... > that did not reduce your tax for the earlier year. ... > > So, medical payments for tax deductions are determined by the year > payment is made, while, using Quicken as I do, medical payments are > recorded by service date. > > I use a class to identify a medical payment where the tax year is > different than the service date year. Indeed, I use the tax year for > the class. That class must be used on all entries for that service. > It > is the exp... and ins... categories that carry the taxable, or not, > indicator (and it's those categories that we have so carefully managed > in the sections above). When class is added to payments entries as > well, Quicken reports can be used to verify that all records for a > service have the same class (the class total will be zero - I've been > know to make a mistake and like to be able to check my work). Most > medical entries will not need a class as the service date and payment > dates are for the same year (i.e., I don't have to do much work to get > it right). > > Should there be insurance reimbursements to report on line 21, assign > a > class such as taxyearL21, "2001L21" for example, to that insurance > reimbursement entry. > > To help calculate the medical tax deductable for a year use a summary > report, row=class, column=year, of medical tax deductible categories > for > all years. That report looks something like > > transaction-year > class description 1998 1999 2000 2001 > 1998 0 0 0 0 > 1999 -55 0 0 0 > 2000 0 -123 0 0 > 2001 0 0 -234 0 > 2001L21 0 0 55 0 > 9999 0 0 -10 0 > other ... ... ... ... > OVERALL TOTAL -4567 -4789 -5432 -678 > > The tax deductable medical expense for the year 2000 tax filing is: > 5432 tax deductible total for the calendar year 2000 service dates > + 123 tax deductible for 1999 service dates paid in the year 2000 > - 234 tax deductible for 2000 service dates paid in the year 2001 > + 55 insurance payment received in 2001 for expense paid in 2000 > and deducted on 2000 tax return > - 10 tax deductible for 2000 service dates paid in the year 2000 > that we choose to not deduct (see Example 6 below) > - ? year 2000 medical expense paid with pre-tax money. Look at > the Quicken account for your FSA or MSA to determine > distributions you received for year 2000 medical expense. > (this assumes you didn't make Quicken entries to > reclassify the FSA distribution amount as non-deductable) > > ----- > ? total tax deductable medical expense for 2000 > > The 2001L21, $55, must be reported as income on 1040 line 21 for the > 2001 tax year. > > Just a little detail left - getting those classes on the appropriate > entries. > > Tax free distributions that must reduce tax deductable amounts can be > accomodated by including in the calculation of your medical tax > deduction for the year (above), or by making two entries that > effectively recategorize deductable to non-deductable. For example: > > 12/31 expT FSA reimbursements -800 > 12/31 expN FSA reimbursements 800 > > Please read the following cases and examples in sequence, even if the > particular case or example doesn't apply to you, as text in examples > is > not repeated in later examples. > > Case 1: Medical deductions itemized every year; the only concern is > getting it right and not having to record insurance reimbursements on > 1040 line 21. > > Example 1: On 1/20/01 we receive an EOB, stmt date 12/28/00, for a > service dated 12/10/00. Having made no previous payment for this > service we write a check to the provider (a 2001 payment) for the > copayment and make the following entries: > > date category Payee memo Increase Decrease > Balance > > 12/10 expT80/2001 Dr Bones 12/28 300 > 300 > 12/10 insT80/2001 Dr Bones 12/28 240 > 60 > 12/10 [check]/2001 Dr Bones 1/20/01 1234 60 > 0 > > While the tax deductible expense (exp minus ins, 300 - 240 = 60) will > be > in the calendar year 2000 totals, it will also be in the class 2001 > totals and thus we subtract it when calculating the tax year 2000 > medical deduction (and will add it when calculating the year 2001). > > Example 2. Saw the doctor 12/10/00, made a copayment at that time > expecting 80% insurance, now its April 15 and time to file taxes, but > the insurance reimbursement hasn't arrived. Entries, from 12/10/00 > are: > > 12/10 expT80 Dr Bones 12/10 300 > 300 > 12/10 [check] Dr Bones 12/10 1234 60 > 240 > > Make the following entry > > 12/10 insT80Estimat Dr Bones 4/15/01 240 > 0 > > ins...Estimat entries are temporary; they will be replaced by actual > insurance reimbursements (you can check with an itemized category > report). With the ins...Estimat entry, the medical deduction > calculated > for this service is 300-240=60, which is the payment that was made. > If you have no idea as to what, if any, insurance reimbursement will > be > made, see Example 6 below. > > With the ins...Estimat entries: > -- the exp... less ins... totals match the amount paid, which is > the > correct medical deduction amount. > > -- the year's totals (which you use as you work on tax filing and > budget planning for this year) don't keep changing as those last > insurance payments dribble in. > > -- you've identified all outstanding insurance claims and just might > choose to call providers/insurers if processing lags. > > When insurance is later received, revise the ins...Estimat entry to > > 12/10 insT80 Dr Bones 6/01/01 240 > 0 > > > Example 3: Saw the doctor 12/10/00, didn't make a copayment, did enter > the expense, and now its April 15 and time to file taxes. The entry > made 12/10 looks like: > > 12/10 expT80 Dr Bones 12/10 300 > 300 > > Since payment will be in the year 2001, change this entry to: > > 12/10 expT80/2001 Dr Bones 12/10 300 > 300 > > Thus it will be subtracted when the year 2000 medical expense is > calculated. Later entries for this service must include the 2001 > class. > > Example 4: Saw the doctor 12/10/00, paid in full and now its April 15 > and time to file taxes. The entries made 12/10 looks like: > > 12/10 expT80 Dr Bones 12/10 300 > 300 > 12/10 [check] Dr Bones 12/10 1234 300 > 0 > > Make the following entry > > 12/10 insT80Estimat Dr Bones 4/15/01 240 > -240 > > This is the same as example 2 except for paying the full amount > instead > of just the copayment. With the addition of the insT80Estimatthe > medical deduction calculated remains $60, even though $300 was paid, > thus avoiding having to report $240 on 1040 line 21 for the 2001 tax > year filing. (tax codes specify the maximum you can deduct, tax codes > do not require you to deduct anything, we choose to not deduct the > $240 > - even though it was paid in 2000 and qualifes as medical expense - so > that we do not have to report next year's insurance reimbursment as > line > 21 income). > > Case summary: When making a payment for a prior year service include > payment year class on the entries for that service. Prior to tax > calculation, examine accounts with nonzero balances and use reports to > find providers service dates with missing payments or insurance > reimbursements in the tax calendar year. If payment was made but no > insurance reimbursement received, add an ins...Estimat entry (or class > "999") for tax deduction calculation. If payment was not made, add a > class to move expense and insurance (if any) to the next calendar > year. > > > Case 2: Grouping deductions. > > Example 5: On 12/30/00 visit the allergy doctor for a shot. We know > charge will be $30, 24 paid by insurance and 6 by us. As this is a > year > we are deducting medical, and will not deduct next year, we want the > payment made this year. So we write the doctor the $6 check before > leaving the office and make the following entries: > > 12/30 expT80 Dr Bones 12/30 30 30 > 12/30 insT80Estimat Dr Bones 12/30 24 6 > 12/30 [check] Dr Bones 12/30 1235 6 0 > > When an EOB is received, stmt date 2/5/01, the insT80Estimatentry is > revised to: > > 12/30 insT80 Dr Bones 2/5/01 24 6 > > Example 6: On 12/30/00 visit the doctor, charge $30. We have no idea > how much, if any, will be paid by insurance. As this is a year we are > deducting medical, and will not deduct next year, we want the payment > made this year. So we write the doctor a $30 check before leaving the > office and make the following entries: > > 12/30 exp80/9999 Dr Bones 12/30 30 30 > 12/30 [check] Dr Bones 12/30 1235 30 0 > > When, eventually, an insurance reimbursement is received for $24, > remove > the 9999 class and make the following entry: > > 12/30 insT80 Dr Bones 6/5/01 24 -24 > 12/10 [check] Dr Bones 6/25/01 refund 24 0 > > Why the "9999" class? What's going on here? To keep the deduction in > 2000, we paid the full amount. Suppose tax filing time arrives > before > the EOB is received. If the "9999" class had been omitted, the $30 > expense, paid in 2000, would be claimed as a deduction and the > insurance > reimbursement received in 2000 would have to be reported as Line 21 > income. To avoid that, the "9999" class identifies this as expense > that > is not to be claimed until the EOB is received. > > If the EOB is received before tax filing, the
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