Kim Mack Rosenberg and Mark L. Berger, CPA
It is Tax Time! Are there tax deductions that are particularly helpful to families with special needs children? To answer these and many other questions, NAA-New York Metro Chapter invited Mark L. Berger, CPA, and Kim Mack Rosenberg to its Parent Network Exchange Meeting on Tuesday, March 10, 2009. We had a standing-room only crowd for this timely topic.Mark Berger is the President of M.L. Berger & Company, Ltd, is a CPA with 20 years of experience. Kim Mack Rosenberg is an Officer of the Board and Treasurer of the NAA-New York Metro Chapter, and a savvy mother of a special needs child, who has done extensive research in this area and has many years of experience in developing a system to organize and document one’s deductions. Mark outlined the tax laws that pertain to individuals with special needs and highlighted the many (sometimes unexpected!) expenses that may qualify as medical tax deductions. Kim translated those principles into the techniques of organizing, documenting and substantiating an effective case for tax deductions.
Mark and Kim provided those who joined us with a number of useful handouts. Mark prepared a list of potential deductions that are relevant to special needs families and Kim provided a write up of her organizational strategies. Mark also provided copies of IRS Publication 502 – a great resource on medical deductions. Kim shared the basic form she uses to track her deductions as well as an annotated copy of an insurance explanation of benefits (“EOB”), showing where to find amounts that insurance might not have paid that may be deductible.
Mark explained that only medical expenses that exceed 7.5% of a family’s adjusted gross income are potentially deductible. The IRS has defined medical expenses in its Publication 502. Many parents were excited to hear that, besides the straightforward medical expenses like doctor’s visits, items like therapeutic schools, therapies, biomedical treatments, transportation related to medical expenses, and a number of other things may be deductible with appropriate substantiating information. Mark discussed with parents some of the limits on these deductions as well as what you need to show that your deductions are appropriate. Parents learned that a number of surprising things might be eligible as medical expenses.
Hands shot up in the audience with many questions about all kinds of expenses parents incur for their special needs children! And what’s the deal with flex spending and deductions? Mark elaborated on Flex Accounts – which, he explained, for some families may be better than the 7.5% deduction. He also emphasized that one has to be careful not to take a second deduction, i.e. any expense credited to a Flex Account cannot be itemized as a tax deduction. Mark also discussed that married couples discuss with their own tax professional whether “Married Filing Separately” status made sense for them – he explained that for some families, this worked out better.
After Mark discussed potential deductions, Kim offered a prescription for “how to prepare for your tax return” and tackle the mounds of documents and receipts that parents amass. The first rule of business: Get a record-keeping system that works for you. Next, file regularly. It doesn’t matter whether you use Quicken or a similar computer program or plastic files from the Container Store – file regularly. And then, back it up, be it on a hard drive, a flash drive, or in cyberspace.
Kim displayed her filing system – a pair of colorful plastic files that she has used for years (they are nice and sturdy) – but she reminded us that, while this worked for her, it was just an idea – we need to experiment to find what is right for each of us, otherwise, you won’t use it. Her large file is compartmentalized for Flex Spending to be submitted, Flex pending, Flex reimbursed, Insurance to submit, pending and paid as well as categories for medical deductions relevant to her family. The small file is for ‘small’ receipts like tolls, cab, groceries, prescriptions, etc. She explained how she processes flex spending and insurance claims -- as each file is processed, the paperwork moves from one compartment to the next, until the item is closed. She can then use these organized documents to make tax time more efficient for herself and her accountant.
She also discussed ways to track mileage, public transportation and taxis, and even ways to figure out whether the deduction for special foods – if available to you – is worth it for your family, since it is a lot of work figuring out the deductible amounts.
Hands shot up again!
Can I store receipts in pdf format?
Yes.
I have a metro card dedicated to medical expenses and I can access my travel log on-line.
Great tip!
I try to use my flex spending for things I am sure insurance won’t cover.
Another great tip!
And there were more questions, tips, and ideas that the audience shared.
Long after the lecture was over, people lingered to exchange ideas, share experiences, trade business cards, and be part of an extended family.
A final note – everyone’s situation is unique and Mark and Kim encouraged us to discuss our specific issues with our tax advisers.
Thank you Kim!
Thank you Mark!
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