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Posted by Una on September 14, 2007, 1:43 am
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What I really need in a medical expenses manager is intelligent
context-sensitive help, a la TurboTax. It would encorporate
references to relevant IRS rulings, Private Letter and others.
I have significant unreimbursed medical expenses, and I have a
hard time figuring out which ones I can claim as deductions on
my federal income tax. IRS Publication 502 does not cut it, as
I have twigged to the business about "facts and circumstances".
Maybe what I really need is a CPA with experience or good access
to a source of distilled experience. So far, I have not found
one. Where do you go for help?
Una
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Posted by R. C. White on September 14, 2007, 11:00 am
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Hi, Una.
> Maybe what I really need is a CPA with experience or good access
> to a source of distilled experience.
Yes! My opinion obviously can't be unbiased, but you are absolutely right.
> So far, I have not found
> one. Where do you go for help?
I have been asked this question hundreds of times and I still don't have a
good answer. We have all seen pillars of the community unmasked as
charlatans, but word of mouth is still the most reliable information
available most of the time. You might start with your local yellow pages,
then see if any of your friends have had dealings with some of these.
Remember, though, that the biggest ads may be from firms who need paid
advertising the most because their word-of-mouth reputation is not the best.
(Personally, I always subscribed to the philosophy that a professional
should not advertise; I listed simply my name, address and phone number
under CPA in the yellow pages. These days, I'm dismayed at the advertising
and promotion done by even the most-respected - and probably quite ethical -
CPA firms.)
My best answer to this question: ask your friends, especially those who
might have had similar tax problems, who they have used and would recommend.
> IRS Publication 502 does not cut it,
Remember that Publications (with large "P") and all other official
publications (Revenue Rulings, Revenue Procedures, official instructions for
the 1040 and other forms, and a host of others) were all written by IRS
attorneys and staff and based on the tax COLLECTOR's interpretation of the
Internal Revenue Code, as passed by Congress. Courts have said that your
attorney's opinion is just as valid - until the judge hears both opinions
and decides which is correct.
You can read the official publications all you want and never find a
dissenting opinion. And the TurboTax Help file is written by Intuit's
attorneys, who sure don't want to get sued by you or by the government, so
only "safe" advice is offered here. If several courts have heard your issue
and have disagreed, you will hear about only the ones decided for the IRS,
with no mention of the other - at least until a higher court decides the IRS
was wrong.
> as
> I have twigged to the business about "facts and circumstances".
I'm not sure what "twigged to" means, but "facts and circumstances" decide
many tax cases.
Like most items in the tax code, medical expense deductions are quite
simple - until they get complicated, and then they can get VERY complicated!
Before I retired over a dozen years ago, we had already seen deductions
allowed for a trumpet that parents bought on the advice of an orthodontist
to help straighten their son's teeth, and an indoor swimming pool that a
lady in a northern state had built into her residence so that she could
follow her doctor's advice to swim every day, even during the northern
winters. You might find those examples in an IRS Publication now, but you
sure didn't before those cases were finally decided. And you would not have
found them in the TurboTax Help file then, either.
So you need a CPA (or a TAX lawyer) who can apply education and experience
to your situation and advise you based on all the facts and circumstances in
your case. Once you've chosen your CPA, give him/her all the facts; don't
try to filter them yourself with your own interpretations of what you might
have read. (There's no line on the tax form where we can write
"significant" or "large"; we need numbers!)
Good luck. Maybe you will find time to report back your experience,
although it might take months or years to know the results.
RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Currently running Vista Ultimate x64)
> What I really need in a medical expenses manager is intelligent
> context-sensitive help, a la TurboTax. It would encorporate
> references to relevant IRS rulings, Private Letter and others.
> I have significant unreimbursed medical expenses, and I have a
> hard time figuring out which ones I can claim as deductions on
> my federal income tax. IRS Publication 502 does not cut it, as
> I have twigged to the business about "facts and circumstances".
>
> Maybe what I really need is a CPA with experience or good access
> to a source of distilled experience. So far, I have not found
> one. Where do you go for help?
>
> Una
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Posted by Una on September 18, 2007, 12:23 pm
Please log in for more thread options >I'm not sure what "twigged to" means, but "facts and circumstances" decide
>many tax cases.
"twigged" = "caught on", "got wise"
>(There's no line on the tax form where we can write
>"significant" or "large"; we need numbers!)
To a first approximation, "significant" means it matters to me. But I
do have numbers. I have all records organized and entered in personal
accounting software. The difference between a "safe" (favors the IRS)
interpretation and a reasonable interpretation of what is deductible
is over $20,000 for one year.
I am working on the word-of-mouth angle. It is slow going. Is there
some reason I need to consult a local professional? Are there state
licensing issues?
What sources of distilled experience do CPAs / tax accountants / tax
attorneys have? Is there some subscription service or association or
database an experienced CPA would rely on?
Una
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Posted by R. C. White on September 18, 2007, 6:03 pm
Please log in for more thread options Hi, Una.
>>I'm not sure what "twigged to" means, but "facts and circumstances" decide
>>many tax cases.
>
> "twigged" = "caught on", "got wise"
Thanks. That's what I suspected. ;<)
>>(There's no line on the tax form where we can write
>>"significant" or "large"; we need numbers!)
>
> To a first approximation, "significant" means it matters to me. But I
> do have numbers. I have all records organized and entered in personal
> accounting software. The difference between a "safe" (favors the IRS)
> interpretation and a reasonable interpretation of what is deductible
> is over $20,000 for one year.
That's a big enough number for most of us. Assuming a 28% tax rate, that
could be a $5,600 tax savings - which would probably cover a good CPA's fee.
> I am working on the word-of-mouth angle. It is slow going. Is there
> some reason I need to consult a local professional? Are there state
> licensing issues?
Yes. Each state makes its own rules on who is allowed to practice public
accounting. There were CPAs before there was an income tax. The main
reason for licensing public accountants is to assure lenders and investors
that the financial statements prepared and presented by borrowers and
corporations are believable. The assurance comes from an examination (an
audit) of those statements by an expert accountant who is independent of
their issuer. The state examines the education, experience and character of
each applicant and administers a challenging written test, then issues a
"certificate" to those who it finds to be qualified to practice in that
state. The requirements vary from state to state, but the examination is
uniform among all the states. It is considered one of the most difficult of
all professional examinations, and only about 14% of candidates pass all
parts on their first try. (At least, that was true 50 years ago, when I
took it; I don't have recent statistics.)
While auditing financial statements so that the public may rely on them is
the justification for licensing Certified Public Accountants in the first
place, over the past century CPAs have become recognized as tax experts, as
well.
While most CPAs are not attorneys, a familiarity with business law is
essential to the practice of accounting. CPAs must know about title to
property, forms of investment, how corporations and partnerships are formed
and governed, and have a working knowledge of many other legal concepts and
practices. A local CPA will be more familiar with taxes of his own state
than a visitor would be. Such topics as community property vary widely from
state to state; mortgages and land contracts are treated differently; many
other local practices are learned just by living in the jurisdiction. Of
course, having your CPA in the same town also makes it more convenient to
consult on matters that come up, too.
> What sources of distilled experience do CPAs / tax accountants / tax
> attorneys have? Is there some subscription service or association or
> database an experienced CPA would rely on?
When I was a sole practitioner in a small town in Oklahoma, with my practice
limited to taxes, I subscribed to "tax services" that cost me over $4,000 a
year - in the 1980s. And I spent at least 3 hours a day just reading new
cases, rulings and other tax literature so that I could advise my clients.
CPAs also are required to engage in continuing education in order to renew
their permit to practice each year. States vary, but a typical requirement
might be at least 40 classroom hours per year. (That's why I stay retired;
if I did a single tax return for a fee, I would first have to "catch up"
after several years of no such education, or be guilty of practicing without
a permit. I can keep calling myself a CPA by paying a small annual fee to
the Oklahoma Accountancy Board, but I can't actually practice without
meeting the continuing education requirements. See my Sig, below.)
This continuing education, both formal and informal, is how a good tax CPA
stays up with the current tax climate. It also helps to have a lawyer who
specializes in taxes and spends a lot of time and effort staying current.
The CPA/attorney team can evaluate the taxpayer's "facts and circumstances"
in light of recent cases and rulings and decide whether a deduction is
likely to be allowed or challenged - and what are the chances of success if
a challenge is appealed within the IRS or to the courts.
Your best source of word-of-mouth advice to choose a CPA might be the
attorneys that you know. They work with several CPAs and probably have a
good idea of which local CPA is aggressive enough - but careful enough - to
get the best results for you.
> Una
Sorry for the long post, Una. But if you hang around this NG much, you'll
see that many of my posts are like this. ;^}
RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Currently running Vista Ultimate x64)
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Posted by Una on September 19, 2007, 12:05 am
Please log in for more thread options >When I was a sole practitioner in a small town in Oklahoma, with my practice
>limited to taxes, I subscribed to "tax services" that cost me over $4,000 a
>year - in the 1980s.
Hm. A CPA practice limited to taxes? Meaning, not bookkeeping? Were most
of your clients businesses (for profit, nonprofit?) or persons?
>Your best source of word-of-mouth advice to choose a CPA might be the
>attorneys that you know.
Now that is a problem. The only local attorney I have dealt with did
something I think was totally uncool. I had a general question about
state law, that happened to relate to a real estate transaction I was
entering. The attorney asked who the other party was. The other party
was the estate of a dead guy. The attorney said no problem, there was
no conflict because the attorney did not represent the estate. But,
the attorney did represent the estate's executor, and principal heir,
and did not tell me that.
I live in a very small town. Choices are limited. Expertise also may
be limited, but on the other hand many people have medical expenses.
>Sorry for the long post, Una. But if you hang around this NG much, you'll
>see that many of my posts are like this. ;^}
No problem. I see you think a lot and for some reason you'd rather
think about work than gardening or breeding fluffy lap dogs. :-)
And I understand the appeal of Usenet: you can work exactly when and
as much as you want, with next to zero aggro. If only we got paid
for it, life would be perfect.
Well, I'll keep working on finding a CPA and/or attorney. Tedious but
probably worth it.
Una
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