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Medical and Dental Expenses Deduction

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It may be possible for you to be able to deduct medical and dental care expenses incurred in the tax year 2010. This deduction, however, is available only if you itemize your deductions on Schedule A (Form 1040).

This deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription (except insulin).

The deduction is allowed only by the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You can do this calculation on Form 1040, Schedule A in computing the amount deductible. The deduction is further reduced by any reimbursement (from the employer or insurance company). It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

The good news is that you may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. Furthermore, you can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn’t meet the gross income or joint return test.

You may also deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.

Finally, distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.

If you have any questions with respect to your tax return, contact Sherayzen Law Office NOW and discuss your case with an experienced Minneapolis tax attorney!

Making Work Pay Credit

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Making Work Pay Tax Credit is a refundable tax credit of available to many taxpayers in the tax year 2010.  The credit is up to $400 for individuals and up to $800 for married taxpayers filing joint returns.  Taxpayers who file Form 1040 and 1040A must use Schedule M to figure out their Making Work Pay Tax Credit (in particular, whether they have already received the full credit in their paychecks).  Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.

There is an income limitation on claiming the tax credit.  If a taxpayer’s modified adjusted gross income is or exceeds $95,000 (for individuals) or $190,000 (if married filing jointly), then he is not eligible to take the credit.

Additional limitations also exist.  In particular, the credit is not available for a taxpayer: who is claimed as a dependent on someone else’s tax return, has not a valid social security number, or who is a nonresident alien.

Contact Sherayzen Law Office to discuss your case with an experienced Minneapolis tax attorney!

Tax Lawyers Minneapolis: Preparing for Initial Consultation I (for Individuals)

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A little disclaimer first: this article is concerned only with individuals contacting Minneapolis tax lawyers for a consultation. I will discuss preparation of business owners for an initial tax consultation in another article.

There are two sides to your preparation for the initial consultation with your Minneapolis tax lawyer. First, the information you need to supply to your tax attorney. Second, the questions you want to ask your tax lawyer. This essay deals with the first part of the preparation.

It is important to understand that your Minneapolis tax attorney will initially have to rely almost exclusively on the information that you supply to him. Moreover, failure to supply the necessary information during initial consultation may lead to significant delays in your case and increase your legal expenses. This is why it is very important to come prepared to the initial interview.

Below, you will find a number of suggestions about how to prepare for the initial consultation with your Minneapolis tax attorney. These suggestions come from my personal experience when I had to advice my clients on what to bring with them to the interview in order to maximize the efficiency of the case and my ability to provide sound tax advice.

The first step is to ask your tax attorney about what you should bring with you. The most common response is that you should bring all documents that are related to your case. Usually, however, I would list specific documents which are customary in a given tax situation. Unfortunately, I have found that a lot of clients, for various reasons, are not willing to bring many of these documents but only what they think a Minneapolis tax lawyer needs. Later on, this usually leads to repetitive documentary requests by a tax attorney from his clients.

“Everything related to the case” usually includes all official documents, accounting documents, e-mails, letters, corporate tax documents, et cetera. Sometimes, this would mean divulging sensitive financial information. For example, if you have foreign bank accounts and you are retaining your attorney to help resolve an FBAR issue, then these bank accounts will need to be submitted to your tax lawyer as well.

The next step is for you to review what documents you actually have. The exact list of documents may differ depending on your particular situation; however, here is a non-exclusive list of the most usual documents you need to bring to your tax attorney:

a) Tax returns: copies of your tax returns, usually going back three tax years. Your tax attorney, however, may advise you to bring tax returns for the past six years in certain situation;
b) Supporting documentation for tax returns (including deductions and credits): usually, you do not have to provide it for the initial interview unless this is relevant to your case (for example, you are contacting a tax attorney to file a tax return);
c) Housing documents: this issue usually comes up with respect to claiming first-time homebuyer tax credit or for tax planning purposes.
d) IRS correspondence: all relevant IRS correspondence should be provided to your tax lawyer;
e) Your correspondence: letters, e-mails, faxes, et cetera if they are relevant to your case;
f) Business/Investment documentation: I discuss preparation for a business-related tax consultation in another article, but it is important to mention here that if your individual tax issue is related to your business or investment activities, then you should bring relevant business documents (incorporation documents, business structure documentation, business tax I.D. number, et cetera);
g) Any other documents relevant to your case: if there is anything else that you think is relevant to your case, then bring it with you. I once had a client who brought carton boxes with unique ID numbers on them.

The third step is to find out what information you are missing. Compare the information you obtained from the second step with the list of documents your attorney provided and what you think is relevant to the case. Identify the documents that are missing and try to obtain the missing information before meeting with your tax attorney. If this is not possible, then let your attorney know during the consultation what information you are missing and whether you will be able to find it after the meeting.

Once you go through these three steps, the first part of the your preparation for the initial tax consultation is finished. I will discuss the second part of your preparation in the next article.

Remember, Sherayzen Law Office can help you with your tax issues, whether you want to check your tax return, negotiate with the IRS, or engage in complex tax planning.

Contact Sherayzen Law Office NOW to discuss your tax case with an experienced tax attorney!