EA Certification Leads to Opportunities For Rendering Tax Planning Advice

December 22, 2011 by  Filed under: Taxes 

Taxpayers do not plan major illnesses, but they still control much of their medical spending. When a medical treatment – particularly an unintended event – causes a jump in medical expenditures, additional discretionary healthcare spending is advisable for the same year. Experts with enrolled agent training possess the knowledge to help individuals engage in proper planning for tax deduction of medical expenses.

Several obstacles confront people in claiming a tax deduction of healthcare outlays. First, only individuals who itemize deductions are eligible. Usually, medical expenses alone are not enough to qualify someone for any benefit from itemizing. They need itemized deductions in other categories in addition to medical costs.

The most important detail from enrolled agent study of this subject is that taxpayers need sufficient healthcare expenses to exceed 7.5 percent of adjusted gross income. Because the excess is the only tax-deductible amount, finding more medical costs to pass that threshold is imperative for taxpayers who are close.

Fortunately, more medical expenses are eligible to count as tax deductions than most people realize. These individuals therefore need advice from a tax professional with EA certification about bunching deductions. This entails using discretion to incur medical costs that have flexible timing. For example, spending on Lasik surgery or a root canal before year-end is the right move for a taxpayer who is already close this year to passing the 7.5 percent barrier from earlier medical costs.

Someone planning on hip replacement surgery in the next calendar year should defer other healthcare expenses. The best tax advice for a person in this situation is to wait until next year for additional medical treatments. These individuals should curtail spending until after January 1 on such items as new eyeglasses or hearing aids.

Sometimes, the process is as simple as timing when to pay medical bills. One technique to examine with enrolled agent work is prepayment. For instance, paying future amounts for orthodontia in process entitles a taxpayer to the deduction in the year of payment.

Medical expenses for anyone named on a tax return count toward a deduction. Often overlooked deductions are available for healthcare expenditures on programs to lose weight or stop smoking. However, a taxpayer’s doctor must recommend these programs. The IRS only allows a tax deduction for medically necessary costs prescribed by a physician.

Deductible medical costs include wheelchairs, crutches, and special equipment for the deaf or sight impaired. Astute tax professionals have learned from study for the enrolled agent examination that improvements to a home – when advised by a physician – create tax deductions. In most cases, home remodeling pursuant to a doctor’s orders occurs for physically handicapped individuals.

However, limits are imposed on the tax deduction for changes to a home. Not all of the cost is tax-deductible. Any amount by which the remodeling expenditure increases property value is omitted from tax deduction. However, the added value is used to increase a taxpayer’s basis in the home.

One factor often encountered in enrolled agent jobs is taxpayers with household employees. Unfortunately, this assistance is never tax-deductible – even when recommended by a doctor.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Fast Forward Academy is a leading publisher of education for enrolled agent training and tax professionals. Access to free questions for the enrolled agent study is available on their website.

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