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Tax Amendments 2013 14

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Tax Amendments 2013 14

Tax amendments 2013 14 Publication 957 - Main Content Table of Contents 1. Tax amendments 2013 14 What is Back Pay?Reporting Back Pay Back Pay Under a Statute Nonstatutory Back Pay Format for Report to the SSA Questions 2. Tax amendments 2013 14 Special Wage PaymentsReporting Special Wage Payments Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments Nonqualified Deferred Compensation and Section 457 Plans Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) PlansSpecial rule for box 11 of Form W-2 (distributions and deferral in the same year). Tax amendments 2013 14 1. Tax amendments 2013 14 What is Back Pay? Back pay is pay received in a tax year(s) for actual or deemed employment in an earlier tax year(s). Tax amendments 2013 14 For social security coverage and benefit purposes, all back pay, whether or not under a statute, is wages if it is payment for covered employment. Tax amendments 2013 14 Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. Tax amendments 2013 14 Report all back pay. Tax amendments 2013 14 However, the tax year(s) for which back pay is credited as wages for social security purposes is different if it is awarded under a statute. Tax amendments 2013 14 See Back Pay Under a Statute , later, for more information. Tax amendments 2013 14 Reporting Back Pay The Internal Revenue Service (IRS) and the SSA consider back pay awards to be wages. Tax amendments 2013 14 However, for income tax purposes, the IRS treats all back pay as wages in the year paid. Tax amendments 2013 14 Employers should use Form W-2, Wage and Tax Statement, or electronic wage reports to report back pay as wages in the year they actually pay the employee. Tax amendments 2013 14 The SSA no longer accepts reports on tapes, cartridges, and diskettes. Tax amendments 2013 14 Example. Tax amendments 2013 14 In 2012, Terry Morris earned wages of $50,000. Tax amendments 2013 14 In the same year, she received $100,000 in settlement of a back pay case against her employer that covered the periods January 2007 through December 2011. Tax amendments 2013 14 Her employer properly reflected social security wages of $110,100 and Medicare wages of $150,000 on her 2012 Form W-2. Tax amendments 2013 14 However, if an employer did not include back pay wages on a previously filed Form W-2, magnetic media, or electronically filed wage report, the employer should prepare a wage correction report, Form W-2c, Corrected Wage and Tax Statement, or electronically filed report, to add the back pay award to the wages previously reported. Tax amendments 2013 14 Example. Tax amendments 2013 14 If, in the above example, Terry Morris' employer had prepared her 2012 Form W-2 reporting social security and Medicare wages of only $50,000 each, the employer would have to correct that report. Tax amendments 2013 14 A Form W-2c correcting the 2012 Form W-2 would show previously reported social security and Medicare wages of $50,000 and the correct amount of $110,100 for social security wages and $150,000 for Medicare wages. Tax amendments 2013 14 SSA treatment of back pay under a statute. Tax amendments 2013 14   Under the law, the SSA credits back pay awarded under a statute to an individual's earnings record in the period(s) the wages should have been paid. Tax amendments 2013 14 This is important because wages not credited to the proper year may result in lower social security benefits or failure to meet the requirements for benefits. Tax amendments 2013 14   However, back pay under statute payments will remain posted to the employee's social security earnings record in the year reported on Form W-2 (or Form W-2c) unless the employer or employee notifies the SSA (in a separate, special report) of the back pay under a statute payment. Tax amendments 2013 14 Then, the SSA can allocate the statutory back pay to the appropriate periods. Tax amendments 2013 14   If a back pay award is not made under a statute, the SSA credits back pay as wages in the year paid. Tax amendments 2013 14    If employers do notify the SSA of this payment, they should prepare a special report (with the information noted below) and send it to: Social Security Administration Attn: CPS Back Pay Staff 7-B-15 SWT 1500 Woodlawn Drive Baltimore, MD 21241-0001 Be sure to send this special report to the above address because the SSA handles it separately from other reports. Tax amendments 2013 14    If you paid the back pay award in the same tax year to which it applies, report the wages on that year's Form W-2. Tax amendments 2013 14 No further action is necessary. Tax amendments 2013 14 Example. Tax amendments 2013 14 In 2012, Judy Wilson received a salary of $30,000 and a back pay under statute award of $2,000 for the period January through June 2012. Tax amendments 2013 14 Her employer properly reported wages of $32,000 for social security and Medicare on her 2012 Form W-2. Tax amendments 2013 14 No further action is necessary. Tax amendments 2013 14 Information the SSA needs to properly credit back pay under a statute (special report). Tax amendments 2013 14   After you complete the special report, you or the employee should send it to the SSA when or after you submit the Form W-2 (on paper or electronically) to the SSA for the year you pay the statutory back pay to the employee. Tax amendments 2013 14 There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. Tax amendments 2013 14 The special report must include the following information. Tax amendments 2013 14 The employer's name, address, and employer identification number (EIN). Tax amendments 2013 14 A signed statement citing the federal or state statute under which the payment was made. Tax amendments 2013 14 If the statute is not identified, the SSA will assume the payment was not under a statute and will not allocate to earlier period(s). Tax amendments 2013 14 The name and telephone number of a person to contact. Tax amendments 2013 14 The SSA may have additional questions concerning the back pay case or the individual employee's information. Tax amendments 2013 14 A list of employees receiving the payment and the following information for each employee: The tax year you paid and reported the back pay. Tax amendments 2013 14 The employee's social security number (SSN). Tax amendments 2013 14 The employee's name (as shown on his or her social security card). Tax amendments 2013 14 The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. Tax amendments 2013 14 The period(s) the back pay award covers (beginning and ending dates—month and year). Tax amendments 2013 14 The other wages paid subject to social security and/or Medicare taxes and reported in the same year as the back pay award (if none, show zero)*. Tax amendments 2013 14 Do not include the back pay award shown in that wage report. Tax amendments 2013 14 If you originally submitted the report under an establishment number, show that number and the amount of money that is to remain under that establishment number. Tax amendments 2013 14 The amount to allocate to each reporting period*. Tax amendments 2013 14 This includes any amount you want allocated (if applicable) to the tax year of the award payment. Tax amendments 2013 14 If you do not give the SSA specific amounts to allocate, the SSA does the allocation by dividing the back pay award by the number of months or years covered by the award. Tax amendments 2013 14 *Note. Tax amendments 2013 14   For periods before January 1, 1978 (before January 1, 1981, for state and local government employers covered by a Section 218 agreement), show the wage amounts for each calendar quarter ending March 31, June 30, September 30, and December 31. Tax amendments 2013 14 For all tax years, show and identify the social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) separately. Tax amendments 2013 14 MQGE is applicable to federal employees beginning in 1983, and for certain state and local government employees beginning in 1986. Tax amendments 2013 14 For tax years 1991 and later, list the social security and Medicare wages separately. Tax amendments 2013 14 If you originally reported the individual's wages under an establishment or payroll record unit number, show the amount of wages to remain in the award year for that number and furnish that number to the SSA along with the EIN. Tax amendments 2013 14 Back Pay Under a Statute Back pay awarded under a statute is a payment by an employer following an award, determination, or agreement approved or sanctioned by a court or government agency responsible for enforcing a federal or state statute that protects an employee's right to employment or wages. Tax amendments 2013 14 Examples of pertinent statutes include: Age Discrimination in Employment Act, Americans with Disabilities Act, Equal Pay Act, Fair Labor Standards Act, National Labor Relations Act, State minimum wage laws, and State statutes that protect rights to employment and wages. Tax amendments 2013 14 Payments based on laws that have a similar effect to those listed above also may qualify as payments made under a statute. Tax amendments 2013 14 Back pay awards, under some of the statutes listed above, may be compensation for personal injury and not pay for employment. Tax amendments 2013 14 Such awards are not wages for social security coverage purposes. Tax amendments 2013 14 If a court-approved or sanctioned settlement agreement states that the agreement is not an admission of discrimination, liability, or act of wrongdoing, the statement does not change the nature of a back pay award. Tax amendments 2013 14 The payments made in such a settlement may still be back pay and wages under the rules discussed here. Tax amendments 2013 14 Nonstatutory Back Pay A payment for back wages negotiated between an employer and employee without an award, determination, or agreement approved or sanctioned by a court or government agency, the payment is not made under a statute. Tax amendments 2013 14 Delayed wage payments and retroactive pay increases resulting from union negotiation or payments under local ordinances or regulations are back pay and are wages. Tax amendments 2013 14 However, they are not payments made under a statute. Tax amendments 2013 14 If you are uncertain whether the back pay award was under a qualified statute, you may need to contact your personnel department or legal counsel or the attorney who filed the suit. Tax amendments 2013 14 Format for Report to the SSA Use the format shown in Table 1, later, to send the SSA the information needed to properly credit back pay under a statute. Tax amendments 2013 14 In a cover letter, include: Name and address of the employer, Statute under which you paid the back pay, Name and telephone number of the employer contact, and Signature of the reporting official. Tax amendments 2013 14 Under certain circumstances, back pay may be a special wage payment and excluded from wages counted under the social security earnings test. Tax amendments 2013 14 If you pay back pay to an employee age 61 or older, report it to the SSA in accordance with this section. Tax amendments 2013 14 Read Special Wage Payments, later, for additional reporting instructions. Tax amendments 2013 14 Questions If you have questions concerning back pay under a statute, call the SSA at 1-800-772-6270. Tax amendments 2013 14 Exception. Tax amendments 2013 14   If you are a state or local government employer who was covered by an agreement under Section 218 of the Social Security Act before January 1, 1987, and you paid a back pay award before January 1, 1987, which you did not report to the SSA, contact your state Social Security Administrator's office. Tax amendments 2013 14 Table 1. Tax amendments 2013 14 Format for Report (Under Covering Letter) to Request SSA to Allocate Back Pay Under Statute Wages Employer's EIN: xx-xxxxxxx Tax Year in Which Award Payment Was Paid: 2012 (1) SSN and Employee Name (2)1 Award Amount and Period(s) (3)2,3 Other Soc. Tax amendments 2013 14 Sec. Tax amendments 2013 14 /Med. Tax amendments 2013 14 Wages Paid In Award Year (4)3 Allocation     Soc. Tax amendments 2013 14 Sec. Tax amendments 2013 14 Med. Tax amendments 2013 14 /MQGE Year Soc. Tax amendments 2013 14 Sec. Tax amendments 2013 14 Med. Tax amendments 2013 14 /MQGE xxx-xx-xxxx HELEN T. Tax amendments 2013 14 SMITH $100,000 1/2009 - 12/2012 $40,000 $40,000 2009 2010 2011 2012 $20,000 25,000 27,000 28,000 $20,000 25,000 27,000 28,000 xxx-xx-xxxx SAM W. Tax amendments 2013 14 EVANS 30,000 7/89-12/91 -0- -0- 1989 1990 1991   6,000 12,000 12,000 xxx-xx-xxxx ROLAND S. Tax amendments 2013 14 ADAMS 15,000 7/80-12/81 -0- -0- 9/80 12/80 1981 3,500 3,500 8,000   1Exclude amounts specifically designated as damages, penalties, etc. Tax amendments 2013 14  2Exclude the amount of back pay, if any, included in that amount. Tax amendments 2013 14  3For periods before January 1, 1978 (and for state and local government (Section 218) employers before January 1, 1981), show the wage amounts by calendar quarters. Tax amendments 2013 14 The social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) must be shown separately FOR ALL YEARS. Tax amendments 2013 14 (Wages subject ONLY to MQGE would be shown in the Medicare/MQGE column; no wages would be shown in the Soc. Tax amendments 2013 14 Sec. Tax amendments 2013 14 column. Tax amendments 2013 14 ) For tax years 1991 and later, the social security and Medicare wages must be listed separately. Tax amendments 2013 14 Explanation of examples. Tax amendments 2013 14 Helen T. Tax amendments 2013 14 Smith–The back pay award, excluding interest, was $100,000 for the periods 1/2009-12/2012. Tax amendments 2013 14 In 2012, this employee was also paid $40,000 in other wages. Tax amendments 2013 14 (Her Form W-2 for 2012 reported $110,100 for social security and $140,000 for Medicare. Tax amendments 2013 14 The SSA allocation will result in adjusted posted wages of $68,000 for social security and $68,000 for Medicare for 2012. Tax amendments 2013 14 ) Sam W. Tax amendments 2013 14 Evans–The back pay award was $30,000 for the periods 7/89-12/91. Tax amendments 2013 14 This employee was hired in 1989 and was subject to MQGE only. Tax amendments 2013 14 He was no longer employed by this governmental employer in 2012. Tax amendments 2013 14 (His Form W-2 for 2012 reported $30,000 for social security and $30,000 for Medicare. Tax amendments 2013 14 After the SSA allocation, he will not have any net posted wages for 2012. Tax amendments 2013 14 ) Roland S. Tax amendments 2013 14 Adams–The back pay award was $15,000 for the periods 7/80-12/81. Tax amendments 2013 14 He was no longer employed by this state and local government (Section 218) employer in 2012. Tax amendments 2013 14 (His Form W-2 for 2012 reported $15,000 for social security and $15,000 for Medicare; after the SSA allocation, he will not have any net posted wages for 2012. Tax amendments 2013 14 ) If the state Social Security Administrator's office needs more information, they can contact the SSA at the following address:   Social Security Administration Office of Income Security Programs Office of Earnings and Program Integrity Policy 6401 Security Boulevard 2506 OPS Baltimore, MD 21235 2. Tax amendments 2013 14 Special Wage Payments A special wage payment (SWP) is an amount paid by an employer to an employee (or former employee) for services performed in a prior year. Tax amendments 2013 14 Employers should report to the SSA special wage payments made to employees and former employees who are recipients of social security retirement benefits. Tax amendments 2013 14 Special wage payments made to a retired employee receiving social security or to an employee who continues to work while receiving social security benefits may reduce the benefits the individual receives if not reported to the SSA. Tax amendments 2013 14 Special wage payments may include (but are not limited to): Accumulated sick and vacation pay, Back pay, Bonuses, Deferred compensation, Payments because of retirement, Sales commissions, Severance pay, and Stock options. Tax amendments 2013 14 Note. Tax amendments 2013 14 Payments made after retirement that are part of the normal payroll cycle should not be routinely reported as special wage payments. Tax amendments 2013 14 Earnings Test. Tax amendments 2013 14   Benefits paid to a social security beneficiary under full retirement age may be reduced if the beneficiary continues to work. Tax amendments 2013 14 The SSA uses the information in boxes 1, 3, and 5 of Form W-2 to determine the beneficiary's current year earnings. Tax amendments 2013 14 Special wage payments, which are for services performed in a prior year, will increase the current year earnings on Form W-2, which also may result in a reduction in the beneficiary's benefits. Tax amendments 2013 14 If a benefit is reduced because of a special wage payment, the beneficiary must get documentation from the employer before the SSA can restore the deducted portion. Tax amendments 2013 14 Therefore, employer reports of special wage payments help prevent incorrect benefit reductions. Tax amendments 2013 14 Reporting Special Wage Payments Employers must report special wage payments for income tax purposes and social security and Medicare taxes in the year received. Tax amendments 2013 14 Report income, social security, and/or Medicare taxes for special wage payments on Form W-2. Tax amendments 2013 14 See Nonqualified Deferred Compensation and Section 457 Plans, later, for reporting nonqualified deferred compensation plan deferrals and payments on Form W-2. Tax amendments 2013 14 In addition, report to the SSA special wage payments made during the reporting year to retired employees and employees who continue to work while receiving social security benefits. Tax amendments 2013 14 Submit reports after the close of the tax year. Tax amendments 2013 14 To avoid delays in processing, submit reports in time to reach the SSA by April 1. Tax amendments 2013 14 Use one of the following reporting methods. Tax amendments 2013 14 Electronic reporting. Tax amendments 2013 14   Special wage payment files can be sent electronically by logging onto Business Services Online (BSO) via the socialsecurity. Tax amendments 2013 14 gov website. Tax amendments 2013 14 BSO enables organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration. Tax amendments 2013 14 You must register to use this website. Tax amendments 2013 14 The web address is www. Tax amendments 2013 14 socialsecurity. Tax amendments 2013 14 gov/bso/bsowelcome. Tax amendments 2013 14 htm. Tax amendments 2013 14   Use the specifications and record layout shown in  Table 2, later. Tax amendments 2013 14 Only one file at a time may be submitted. Tax amendments 2013 14 If your file is large (>10MB), or you have a slow internet connection, the transmission will be faster if the file is zipped. Tax amendments 2013 14 A zipped file contains a file that has been compressed to reduce its file size. Tax amendments 2013 14 WinZip and PKZIP are examples of acceptable compression packages. Tax amendments 2013 14   Electronic submissions not meeting the specifications in Table 2 will be rejected. Tax amendments 2013 14 Paper listing. Tax amendments 2013 14   A paper listing can be used to report special wage payments to several employees. Tax amendments 2013 14 Use the format shown in Table 3, later. Tax amendments 2013 14 Submit paper listings to the local SSA office nearest your place of business. Tax amendments 2013 14 Visit www. Tax amendments 2013 14 socialsecurity. Tax amendments 2013 14 gov/locator to find a Social Security office near you. Tax amendments 2013 14 Form SSA-131. Tax amendments 2013 14   Use Form SSA-131 to report special wage payments made to an employee. Tax amendments 2013 14 Also use this form to report nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in box 11 of Form W-2. Tax amendments 2013 14    This image is too large to be displayed in the current screen. Tax amendments 2013 14 Please click the link to view the image. Tax amendments 2013 14 Publication 957 Reporting Back Pay to the Social Security Administration Instructions for Form SSA–131   EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. Tax amendments 2013 14 Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. Tax amendments 2013 14 2. Tax amendments 2013 14 Enter the date the employee retired. Tax amendments 2013 14 Enter “Not Retired” if the employee has not retired. Tax amendments 2013 14 3. Tax amendments 2013 14 Enter the date that the employee last performed services; was not expected to return to work; and was not subject to recall to render additional services. Tax amendments 2013 14 This date should be the same as or earlier than the date in item “2”. Tax amendments 2013 14 Enter “Not Retired” if the employee has not retired. Tax amendments 2013 14 4. Tax amendments 2013 14 Enter the wages that were paid to the employee in the tax year that were for services that were performed in years prior to the tax year or that were paid on account of retirement. Tax amendments 2013 14  Examples (not all inclusive) of payments to be included: Payments in lieu of vacation that were earned in a year prior to the tax year. Tax amendments 2013 14 Accumulated sick payments which were paid in a lump sum based on “retirement” as the sole condition of payment. Tax amendments 2013 14 Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year. Tax amendments 2013 14 Payments “on account of retirement”–dismissal, severance or termination pay paid because of retirement. Tax amendments 2013 14 Bonuses which are paid pursuant to a prior contract, agreement or promise causing the employee to expect such payments regularly; or announced to induce the employee to work more steadily, rapidly or efficiently or to remain with the employer. Tax amendments 2013 14 Stock Options. Tax amendments 2013 14   Do not include in item “4” payments: For annual, sick, holiday, or vacation pay if used (absence from work) prior to the date of retirement (earlier of items “2” or “3”). Tax amendments 2013 14 That were reported or will be reported under “Nonqualified Plans” on the Form W-2. Tax amendments 2013 14 That were deducted from the employee's wages and paid to a deferred compensation plan (e. Tax amendments 2013 14 g. Tax amendments 2013 14 , 401k). Tax amendments 2013 14 Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages). Tax amendments 2013 14 Bonuses earned and paid in the tax year. Tax amendments 2013 14 5. Tax amendments 2013 14 Check whether payments listed in item 4 will be made for years after the tax year. Tax amendments 2013 14 If yes, please show the amounts and years in which these will be paid, if known. Tax amendments 2013 14 6. Tax amendments 2013 14 Nonqualified deferred compensation and section 457 plans only. Tax amendments 2013 14 If you were unable to report nonqualified deferred compensation or section 457 plan payments and deferrals (contributions) on Form W-2 because both payments and deferrals occurred during the year, show the amount of wages earned by the employee during the tax year. Tax amendments 2013 14 Generally, the wages earned will be the compensation reported in block 1 of Form W-2 less payments from a nonqualified deferred compensation (or 457) plan, but including any amounts deferred under the plan during the tax year (See IRS Publication 957). Tax amendments 2013 14 Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404. Tax amendments 2013 14 702. Tax amendments 2013 14 The information that you provide will be used in making a determination regarding the amount of Social Security benefits payable to the above named individual. Tax amendments 2013 14 While your response is voluntary, if you do not respond we may not be able to make a correct determination regarding the amount of Social Security benefits payable to the above named individual for the year in question. Tax amendments 2013 14 We may also use the information you give us when we match records by computer. Tax amendments 2013 14 Matching programs compare our records with those of other Federal, State, or local government agencies. Tax amendments 2013 14 Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. Tax amendments 2013 14 The law allows us to do this even if you do not agree to it. Tax amendments 2013 14 Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. Tax amendments 2013 14 If you want to learn more about this, contact any Social Security Office. Tax amendments 2013 14 The Paperwork Reduction Act: This information collection meets the clearance requirements of 44 U. Tax amendments 2013 14 S. Tax amendments 2013 14 C. Tax amendments 2013 14 §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. Tax amendments 2013 14 You are not required to answer these questions unless we display a valid Office of Management and Budget control number. Tax amendments 2013 14 We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. Tax amendments 2013 14 Form SSA-131 (8-2001) EF (06-2002)   Submit Form SSA-131 to the SSA office nearest your place of business. Tax amendments 2013 14 Or, the employee can submit it to the SSA office handling the claim. Tax amendments 2013 14 You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. Tax amendments 2013 14 If reporting on more than one employee, complete a separate Form SSA-131 for each employee or use the paper listing format (except for reporting nonqualified and section 457 plan deferrals and payments) in Table 3. Tax amendments 2013 14 Do not report payments from nonqualified deferred compensation or section 457 plans that were reported in box 11 of Form W-2. Tax amendments 2013 14 Use Form SSA-131 if deferrals to and payments from nonqualified or section 457 plans occurred during the tax year. Tax amendments 2013 14 Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments A nonstatutory (nonqualified) option to purchase stock which is exercised in a year after the year in which the option was earned is a special wage payment. Tax amendments 2013 14 It should not count for the social security earnings test. Tax amendments 2013 14 Nonstatutory (nonqualified) options exercised as special wage payments by retired employees or employees who continue to work while receiving social security benefits should be reported by employers using the above reporting methods. Tax amendments 2013 14 Nonqualified Deferred Compensation and Section 457 Plans A nonqualified deferred compensation plan is a plan or arrangement established and maintained by an employer for one or more of its employees that provides for the deferral of compensation, but does not meet the requirements for a tax-qualified deferred compensation plan. Tax amendments 2013 14 For social security and Medicare purposes, deferred compensation plans for employees of state and local governments (section 457 plans) are treated the same as nonqualified plans. Tax amendments 2013 14 Nonqualified and section 457 plans are reported differently than other special wage payments. Tax amendments 2013 14 See Reporting Amounts Deferred to Nonqualified and Section 457 Plans below for specific instructions. Tax amendments 2013 14 Reporting Amounts Deferred to Nonqualified and Section 457 Plans Generally, when the related services are performed, nonqualified deferred compensation is subject to social security and Medicare tax when deferred. Tax amendments 2013 14 However, if nonqualified and section 457 plans contain provisions that delay the employee's right to receive payments from the plan, a period of substantial risk of forfeiture exists. Tax amendments 2013 14 The plans' deferrals, or contributions, are not subject to social security and Medicare taxes until the period of substantial risk of forfeiture ends. Tax amendments 2013 14 No risk of forfeiture. Tax amendments 2013 14   If there is no risk of forfeiture, report wage amounts deferred to a nonqualified deferred compensation or section 457 plan in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Tax amendments 2013 14 Example. Tax amendments 2013 14 Company X's nonqualified deferred compensation plan allows the deferral of up to $20,000 of employee salaries each year. Tax amendments 2013 14 The plan has no risk of forfeiture. Tax amendments 2013 14 In 2012, Employee A defers $20,000 to the plan from a total salary of $200,000. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 $200,000 Box 3* 110,100 Box 5 200,000 *Wage base maximum for tax year 2012 Risk of forfeiture lapses before retirement. Tax amendments 2013 14   If the substantial risk of forfeiture lapses before the employee retires, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Tax amendments 2013 14 The accumulated deferrals are reported along with any other social security and Medicare wages earned during the year. Tax amendments 2013 14   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. Tax amendments 2013 14 If the employee continues working, future deferrals are social security and Medicare wages when they are earned. Tax amendments 2013 14    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Tax amendments 2013 14 Risk of forfeiture lapses at retirement. Tax amendments 2013 14   When an employee's right to a payment is contingent upon working until retirement, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, as social security and/or Medicare wages in the year of retirement. Tax amendments 2013 14 Add the amount to other wages paid in that year, and enter in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Tax amendments 2013 14   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. Tax amendments 2013 14    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Tax amendments 2013 14 Example—risk of forfeiture. Tax amendments 2013 14 At the end of the risk-of-forfeiture period for Company Y's nonqualified deferred compensation plan, Employee B's accumulated deferrals, plus interest earned by the plan, are $120,000, not including B's $20,000 deferral for this year. Tax amendments 2013 14 B's wages, including this year's deferred amount, are $80,000. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 $60,000 Box 3* 110,100 Box 5 200,000 Box 11 120,000 *Wage base maximum for tax year 2012 Reporting Payments From Nonqualified and Nongovernmental Section 457 Plans When an employee or former employee retires and begins receiving payments (distributions) from a nonqualified or nongovernmental section 457 plan, report the payments in boxes 1 and 11 of Form W-2. Tax amendments 2013 14 Report payments (distributions) from a governmental section 457 plan on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Tax amendments 2013 14 Example. Tax amendments 2013 14 Employee D retired from the XYZ company and began receiving social security benefits. Tax amendments 2013 14 XYZ paid D a $12,000 bonus upon retirement for sales made in a prior year, and D received $25,000 in payments from XYZ's nonqualified deferred compensation plan. Tax amendments 2013 14 In addition, D agreed to continue performing services for XYZ, but on a part-time basis for wages of $15,000 per year. Tax amendments 2013 14 D made no deferrals to the nonqualified plan this year. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 $52,000 Box 3 27,000 Box 5 27,000 Box 11 25,000 Report the $12,000 bonus to the SSA using electronic reporting, a paper listing, or Form SSA-131. Tax amendments 2013 14 For more information, see Reporting Special Wage Payments , earlier. Tax amendments 2013 14 Reporting Payments and Deferrals in the Same Year Do not complete box 11 when payments (distributions) are made from a nonqualified plan and deferrals are reported in boxes 3 and/or 5 of Form W-2 (including current year deferrals). Tax amendments 2013 14 Report to the SSA on Form SSA-131 the total amount the employee earned during the tax year. Tax amendments 2013 14 Normally, the amount earned is the amount reported in box 1 of Form W-2 less payments from a nonqualified or section 457 plan, but including any amounts deferred under the plan during the tax year. Tax amendments 2013 14 See Form SSA-131 and its instructions, earlier. Tax amendments 2013 14 Example. Tax amendments 2013 14 Employee K retired this year from Company XYZ and began receiving social security benefits. Tax amendments 2013 14 During the year he earned wages of $50,000 and deferred $35,000 of the wages into the company's nonqualified deferred compensation plan. Tax amendments 2013 14 K also received $75,000 in payments from the company's nonqualified plan. Tax amendments 2013 14 Form W-2 Completion Amount Special Wage Payment $75,000 Wages 50,000 Minus: deferral 35,000 Total reported in Box 1 $90,000     Wages including deferral reported in  Boxes 3 and 5 $50,000     Leave Box 11 blank. Tax amendments 2013 14 File Form SSA-131 -0-     Form SSA-131 Completion Amount from Box 1 of Form W-2 $90,000 Minus: payments from a nonqualified plan 75,000 Plus: amounts deferred into the plan during the year 35,000 Total wages earned for purposes of Form SSA-131 (item 6) $50,000 Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) Plans It is not necessary to show amounts deferred during the year under an NQDC plan subject to section 409A. Tax amendments 2013 14 If you report section 409A deferrals, show the amount in box 12 of Form W-2 using code Y. Tax amendments 2013 14 For more information, see Notice 2008-115, 2008-52 I. Tax amendments 2013 14 R. Tax amendments 2013 14 B. Tax amendments 2013 14 1367, available at www. Tax amendments 2013 14 irs. Tax amendments 2013 14 gov/irb/2008-52_IRB/ar10. Tax amendments 2013 14 html. Tax amendments 2013 14 Special reporting rules apply when an NQDC plan is not compliant with section 409A (when there has been a “plan failure”). Tax amendments 2013 14 Income included under section 409A from an NQDC plan is reported in box 1 and box 12 of Form W-2 using code Z. Tax amendments 2013 14 See Notice 2008-115. Tax amendments 2013 14 The following examples use small dollar amounts for illustrative purposes. Tax amendments 2013 14 However, the amount reported in box 3 of Form W-2 is always limited by the social security earnings wage base (for example, $110,100 for 2012). Tax amendments 2013 14 The term “vested” in the following examples means that the amount deferred is not subject to a substantial risk of forfeiture. Tax amendments 2013 14 Conversely, the term “not vested” means that the amount deferred is subject to a substantial risk of forfeiture. Tax amendments 2013 14 The examples assume that the NQDC plan is in compliance with section 409A, and that amounts deferred under the plan are not includible in gross income as they are deferred. Tax amendments 2013 14 For purposes of the examples, it is assumed that the regular pay of the employee is remuneration for employment and wages for employment tax purposes except to the extent the deferral of a portion of the regular pay results in a reduction in wages. Tax amendments 2013 14 Example 1: Deferral that is immediately vested (no substantial risk of forfeiture) with no distributions and no vesting of prior-year deferrals. Tax amendments 2013 14 For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into her employer’s NQDC plan. Tax amendments 2013 14 The deferral of $20 was vested upon deferral and there was an employer match of $10 under the plan, which was also vested. Tax amendments 2013 14 Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 vested deferral) $180 Box 3 ($200 Regular pay plus $10 Employer match, vested) 210 Box 5 ($200 Regular pay plus $10 Employer match, vested) 210 Box 11 -0- Example 2: Deferral with delayed vesting (substantial risk of forfeiture) of employee and employer portions (no distributions and no vesting of prior-year deferrals). Tax amendments 2013 14 For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. Tax amendments 2013 14 The deferral of $20 was not vested upon deferral, and there was an employer match of $10 under the plan, which was also not vested. Tax amendments 2013 14 Regular pay = $200; Deferral, not vested = $20; Employer match, not vested = $10. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, not vested) $180 Box 3 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 5 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 11 -0- Example 3: Deferral that is immediately vested with prior-year deferrals and investment earnings on the prior-year deferrals that are now vesting (no distributions). Tax amendments 2013 14 For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. Tax amendments 2013 14 The deferral of $20 was vested upon deferral. Tax amendments 2013 14 During the year, $100 of prior-year deferrals and $15 of investment earnings on the $100 of prior-year deferrals became vested. Tax amendments 2013 14 Regular pay = $200; Deferral, vested = $20; Vesting of prior-year deferrals = $100; Vesting of investment earnings on $100 of prior-year deferral = $15. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, vested) $180 Box 3 ($200 Regular pay plus $100 vested prior-year deferral plus $15 earnings on deferral) 315 Box 5 ($200 Regular pay plus $100 vested prior-year deferral plus $15 vested investment earnings on prior year deferral) 315 Box 11 ($100 vested prior-year deferral plus $15 earnings) 115 Example 4: No deferrals but there are distributions (no vesting of prior-year deferrals). Tax amendments 2013 14 For the year, the employee’s regular pay was $100, and the employee deferred no pay into the employer’s NQDC plan. Tax amendments 2013 14 There was no vesting of prior-year deferrals under the plan. Tax amendments 2013 14 During the year, there were total distributions of $50 from the plan to the employee. Tax amendments 2013 14 Regular pay = $100; Distribution = $50. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($100 Regular pay plus $50 Distribution) $150 Box 3 ($100 Regular pay ) 100 Box 5 ($100 Regular pay) 100 Box 11 ($50 Distribution) 50 Special rule for box 11 of Form W-2 (distributions and deferral in the same year). Tax amendments 2013 14   If, in the same year, there are NQDC distributions and there are deferrals that are reportable in boxes 3 and/or 5 (current or prior-year deferrals) of Form W-2, do not complete box 11. Tax amendments 2013 14 Instead, report on Form SSA-131 the total amount the employee earned during the year. Tax amendments 2013 14 * Submit the SSA-131 to the nearest SSA office or give it to the employee. Tax amendments 2013 14   *Generally, the amount earned by the employee during the tax year for purposes of item 6 of Form SSA-131 is the amount reported in box 1 of Form W-2 plus current-year deferrals that are vested (employee and employer portions) less distributions. Tax amendments 2013 14 Do not consider prior-year deferrals that are vesting in the current year. Tax amendments 2013 14 If there was a plan failure, the box 1 amount in this calculation should be as if there were no plan failure. Tax amendments 2013 14 Example 5: Deferral that is immediately vested and there are distributions (no vesting of prior-year deferrals). Tax amendments 2013 14 For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Tax amendments 2013 14 There was also an employer match of $10. Tax amendments 2013 14 The deferral and employer match were vested upon deferral. Tax amendments 2013 14 There was no vesting of prior-year deferrals under the plan. Tax amendments 2013 14 During the year, there were total distributions of $50 from the plan to the employee. Tax amendments 2013 14 Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10; Distribution = $50. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, vested) $230 Boxes 3 and 5 ($200 Regular pay plus $10 vested employer match) 210 Leave Box 11 blank. Tax amendments 2013 14 File Form SSA-131 -0-     Form SSA-131 Completion Item 6 - amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $30 vested current year employee deferral and employer match) $210 Example 6: Deferral with delayed vesting and there are distributions (no vesting of prior-year deferrals). Tax amendments 2013 14 For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Tax amendments 2013 14 The deferral was not vested upon deferral. Tax amendments 2013 14 There was no vesting of prior-year deferrals under the plan. Tax amendments 2013 14 During the year, there were total distributions of $50 from the plan to the employee. Tax amendments 2013 14 Regular pay = $200; Deferral, not vested = $20; Distribution = $50. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay minus $20 deferral that is not vested) 180 Box 11 ($50 Distribution). Tax amendments 2013 14 50 Example 7: Deferral that is immediately vested and there are distributions (also vesting of prior-year deferrals and earnings on those prior-year deferrals). Tax amendments 2013 14 For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Tax amendments 2013 14 The deferral was vested upon deferral. Tax amendments 2013 14 There was vesting of $100 of prior-year deferrals and $15 of earnings on the $100 prior-year deferral under the plan. Tax amendments 2013 14 During the year, there were total distributions of $50 from the plan to the employee. Tax amendments 2013 14 Regular pay = $200; Deferral, vested = $20; Distribution = $50; Vesting of prior-year deferrals ($100) and earnings on those prior-year deferrals ($15) = $115. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 vested deferral $230 Boxes 3 and 5 ($200 Regular pay Plus $115 vested prior deferral (with vested earnings on the deferral)) 315 Leave Box 11 blank. Tax amendments 2013 14 File Form SSA-131 -0-     Form SSA-131 Completion Item 6, amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $20 vested current year deferral) $200 Example 8: Deferral with delayed vesting and there are distributions (vesting of prior-year deferrals, including employer matches, and earnings on those deferrals). Tax amendments 2013 14 For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Tax amendments 2013 14 The deferral was not vested upon deferral. Tax amendments 2013 14 There was also vesting of prior-year deferrals and employer matches and earnings on these amounts under the plan ($115). Tax amendments 2013 14 During the year, there were total distributions of $50 from the plan to the employee. Tax amendments 2013 14 Regular pay = $200; Deferral, not vested = $20; Distribution = $50; Vesting of prior-year deferrals and employer match = $100 plus earnings on that $100 of $15. Tax amendments 2013 14 Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay plus $115 vested prior-year deferral and prior year employer match and earning on the prior year amounts minus $20 deferral that is not vested) 295 Leave Box 11 blank. Tax amendments 2013 14 File Form SSA-131 -0-     Form SSA-131 Completion Item 6 ($230 Amount from Box 1 of Form W-2 minus $50 Distribution) $180 Table 2. Tax amendments 2013 14 Specifications for Electronic Reporting of Special Wage Payments Record Position  Field Size   Description Start End 1 3 3 Record Type—must include only the capital letters “SWP” 4 12 9 SSN—must be numeric and may not be all zeros 13 27 15 Last Name—all capitals and no punctuation; may have blanks on right only 28 38 11 First Name—all capitals and no punctuation; may have blanks on right only 39 39 1 Middle Initial—must be either a capital letter or blank 40 48 9 EIN—must be numeric and may not be all zeros 49 59 11 Payment—must be numeric; may not be all zeros; last two digits on right are assumed to be cents; no period or dollar sign 60 63 4 Payment Year—must be only a four-digit year 64 66 3 SSA Office Code—must be numeric and may be all zeros 67 67 1 Payment Type Code—must be the capital letter “T” 68 117 50 Filler  The record format is a fixed length of 117. Tax amendments 2013 14  The file format is ASCII. Tax amendments 2013 14  Submit only one file at a time. Tax amendments 2013 14   Table 3. Tax amendments 2013 14 Sample—Paper Listing for Reporting Special Wage Payments to Several Employees Report of Special Wage PaymentsTax Year: Page of A. Tax amendments 2013 14 Employer Name: EIN:   Address: Contact Name:     Phone: ( )   . Tax amendments 2013 14 1) B. Tax amendments 2013 14 Employee Name: (Last) (First) (MI)   C. Tax amendments 2013 14 SSN: D. Tax amendments 2013 14 SWP:$ E. Tax amendments 2013 14 Type: Other: 2) B. Tax amendments 2013 14 Employee Name: (Last) (First) (MI)   C. Tax amendments 2013 14 SSN: D. Tax amendments 2013 14 SWP:$ E. Tax amendments 2013 14 Type: Other: 3) B. Tax amendments 2013 14 Employee Name: (Last) (First) (MI)   C. Tax amendments 2013 14 SSN: D. Tax amendments 2013 14 SWP:$ E. Tax amendments 2013 14 Type: Other: 4) B. Tax amendments 2013 14 Employee Name: (Last) (First) (MI)   C. Tax amendments 2013 14 SSN: D. Tax amendments 2013 14 SWP:$ E. Tax amendments 2013 14 Type: Other: 5) B. Tax amendments 2013 14 Employee Name: (Last) (First) (MI)   C. Tax amendments 2013 14 SSN: D. Tax amendments 2013 14 SWP:$ E. Tax amendments 2013 14 Type: Other:     INSTRUCTIONS:   Enter tax year and page number. Tax amendments 2013 14   A. Tax amendments 2013 14 Employer name, employer identification number (EIN), address, the name of a contact person, and a phone number where the contact person can be reached during normal business hours. Tax amendments 2013 14   B. Tax amendments 2013 14 Employee's name. Tax amendments 2013 14   C. Tax amendments 2013 14 Employee's social security number (SSN). Tax amendments 2013 14   D. Tax amendments 2013 14 Total amount of special wage payments made to the employee. Tax amendments 2013 14   E. Tax amendments 2013 14 Type of special wage payment from the following list: (1) Vacation Pay, (2) Sick Pay, (3) Severance Pay,  (4) Bonus, (5) Deferred Compensation, (6) Stock Options, and (7) Other—Please explain. Tax amendments 2013 14   Do not use a paper listing for nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in block 11 of Form W-2. Tax amendments 2013 14 (Get Form SSA-131. Tax amendments 2013 14 )                 Prev  Up  Next   Home   More Online Publications
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IRS Implements Changes to ITIN Application Requirement

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Effective January 1, 2013, the IRS implemented new procedures for issuing new Individual Taxpayer Identification Numbers (ITINs). Designed specifically for tax-administration purposes, ITINs are only issued to people who are not eligible to obtain a Social Security Number.

Specifically, the new procedures apply to most applicants submitting Forms W-7, Application for IRS Individual Taxpayer Identification Number. ITINs for individuals in these categories generally are issued during the tax filing season with the submission of a Form 1040, U.S. Individual Income Tax Return.

Questions and Answers

Some Applicants Not Impacted By Changes

Some categories of applicants are not impacted by these changes:

  • Military spouses and dependents without an SSN who need an ITIN (Military spouses use box e on Form W-7 and dependents use box d). Exceptions to the new document standards will be made for military family members satisfying the documentation requirements by providing a copy of the spouse or parent’s U.S. military identification, or applying from an overseas APO/FPO address.
  • Nonresident aliens applying for ITINs for the purpose of claiming tax treaty benefits (use boxes a and h on Form W-7). Non-resident alien applicants generally need ITINs for reasons besides filing a U.S. tax return. This is necessary for nonresident aliens who may be subject to third-party withholding for various income, such as certain gambling winnings or pension income, or need an ITIN for information reporting purposes. While existing documentation standards will be maintained only for these applicants, scrutiny of the documents will be heightened. ITIN applications of this category that are accompanied by a U.S. tax return will be subject to the new interim document standards.

The October 2, 2012 procedures put into place for the following groups will remain in effect:

  • Student and Exchange Visitor Program (SEVP) participants. SEVP participants already provide documentation to the Department of Homeland Security under the requirements of that program. Individuals studying under the SEVP will be required to apply through a university, college or other SEVP-approved institution. These are individuals admitted to the U.S. under an F, J or M visa who receive taxable scholarship, fellowship or other grants reportable by the school on Form W-2 or Form 1042-S. These procedures cover applications for the primary applicant, their spouse and dependents.
  • Non-citizens with approved Tax Year 2011 extensions to file their tax returns. These are noncitizens who requested an extension of time to file a 2011 federal income tax return for resident and nonresident aliens and choose to not submit originals documents or copies.
Page Last Reviewed or Updated: 12-Dec-2013

The Tax Amendments 2013 14

Tax amendments 2013 14 Publication 502 - Main Content Table of Contents What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Tax amendments 2013 14 How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Spouse Dependent Decedent What Medical Expenses Are Includible?Abortion Acupuncture Alcoholism Ambulance Annual Physical Examination Artificial Limb Artificial Teeth Bandages Birth Control Pills Body Scan Braille Books and Magazines Breast Pumps and Supplies Breast Reconstruction Surgery Capital Expenses Car Chiropractor Christian Science Practitioner Contact Lenses Crutches Dental Treatment Diagnostic Devices Disabled Dependent Care Expenses Drug Addiction Drugs Eye Exam Eyeglasses Eye Surgery Fertility Enhancement Founder's Fee Guide Dog or Other Service Animal Health Institute Health Maintenance Organization (HMO) Hearing Aids Home Care Home Improvements Hospital Services Insurance Premiums Intellectually and Developmentally Disabled, Special Home for Laboratory Fees Lactation Expenses Lead-Based Paint Removal Learning Disability Legal Fees Lifetime Care—Advance Payments Lodging Long-Term Care Meals Medical Conferences Medical Information Plan Medicines Nursing Home Nursing Services Operations Optometrist Organ Donors Osteopath Oxygen Physical Examination Pregnancy Test Kit Prosthesis Psychiatric Care Psychoanalysis Psychologist Special Education Sterilization Stop-Smoking Programs Surgery Telephone Television Therapy Transplants Transportation Trips Tuition Vasectomy Vision Correction Surgery Weight-Loss Program Wheelchair Wig X-ray What Expenses Are Not Includible?Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby Controlled Substances Cosmetic Surgery Dancing Lessons Diaper Service Electrolysis or Hair Removal Flexible Spending Account Funeral Expenses Future Medical Care Hair Transplant Health Club Dues Health Coverage Tax Credit Health Savings Accounts Household Help Illegal Operations and Treatments Insurance Premiums Maternity Clothes Medical Savings Account (MSA) Medicines and Drugs From Other Countries Nonprescription Drugs and Medicines Nutritional Supplements Personal Use Items Swimming Lessons Teeth Whitening Veterinary Fees Weight-Loss Program How Do You Treat Reimbursements?Insurance Reimbursement How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Sale of Medical Equipment or Property Damages for Personal Injuries Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons COBRA Premium Assistance Health Coverage Tax CreditWho Can Take This Credit? Qualifying Family Member Qualified Health Insurance Nonqualified Health Insurance Eligible Coverage Month How To Take the Credit How To Get Tax HelpLow Income Taxpayer Clinics What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Tax amendments 2013 14 These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Tax amendments 2013 14 They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Tax amendments 2013 14 Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Tax amendments 2013 14 They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Tax amendments 2013 14 Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Tax amendments 2013 14 Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Tax amendments 2013 14 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. Tax amendments 2013 14 (But see Decedent under Whose Medical Expenses Can You Include, for an exception. Tax amendments 2013 14 ) If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Tax amendments 2013 14 If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Tax amendments 2013 14 If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Tax amendments 2013 14 If you did not claim a medical or dental expense that would have been deductible in an earlier year, you can file Form 1040X, Amended U. Tax amendments 2013 14 S. Tax amendments 2013 14 Individual Income Tax Return, for the year in which you overlooked the expense. Tax amendments 2013 14 Do not claim the expense on this year's return. Tax amendments 2013 14 Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Tax amendments 2013 14 You cannot include medical expenses that were paid by insurance companies or other sources. Tax amendments 2013 14 This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services. Tax amendments 2013 14 Separate returns. Tax amendments 2013 14   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Tax amendments 2013 14 Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Tax amendments 2013 14 Community property states. Tax amendments 2013 14   If you and your spouse live in a community property state and file separate returns or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Tax amendments 2013 14 Generally, each of you should include half the expenses. Tax amendments 2013 14 If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Tax amendments 2013 14 If you live in a community property state and are not filing a joint return, see Publication 555, Community Property. Tax amendments 2013 14 How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI. Tax amendments 2013 14 But if either you or your spouse was born before January 2, 1949, you can deduct the amount of your medical and dental expenses that is more than 7. Tax amendments 2013 14 5% of your AGI. Tax amendments 2013 14 Example. Tax amendments 2013 14 You are unmarried and were born after January 2, 1949, and your AGI is $40,000, 10% of which is $4,000. Tax amendments 2013 14 You paid medical expenses of $2,500. Tax amendments 2013 14 You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Tax amendments 2013 14 Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Tax amendments 2013 14 There are different rules for decedents and for individuals who are the subject of multiple support agreements. Tax amendments 2013 14 See Support claimed under a multiple support agreement , later under Qualifying Relative. Tax amendments 2013 14 Spouse You can include medical expenses you paid for your spouse. Tax amendments 2013 14 To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Tax amendments 2013 14 Example 1. Tax amendments 2013 14 Mary received medical treatment before she married Bill. Tax amendments 2013 14 Bill paid for the treatment after they married. Tax amendments 2013 14 Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Tax amendments 2013 14 If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Tax amendments 2013 14 Mary would include the amounts she paid during the year in her separate return. Tax amendments 2013 14 If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Tax amendments 2013 14 Example 2. Tax amendments 2013 14 This year, John paid medical expenses for his wife Louise, who died last year. Tax amendments 2013 14 John married Belle this year and they file a joint return. Tax amendments 2013 14 Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Tax amendments 2013 14 Dependent You can include medical expenses you paid for your dependent. Tax amendments 2013 14 For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Tax amendments 2013 14 A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Tax amendments 2013 14 The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Tax amendments 2013 14 S. Tax amendments 2013 14 citizen or national or a resident of the United States, Canada, or Mexico. Tax amendments 2013 14 If your qualifying child was adopted, see Exception for adopted child , later. Tax amendments 2013 14 You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Tax amendments 2013 14 Exception for adopted child. Tax amendments 2013 14   If you are a U. Tax amendments 2013 14 S. Tax amendments 2013 14 citizen or national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Tax amendments 2013 14 S. Tax amendments 2013 14 citizen or national, or a resident of the United States, Canada, or Mexico. Tax amendments 2013 14 Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, other than to claim a refund. Tax amendments 2013 14 Adopted child. Tax amendments 2013 14   A legally adopted child is treated as your own child. Tax amendments 2013 14 This child includes a child lawfully placed with you for legal adoption. Tax amendments 2013 14   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Tax amendments 2013 14   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Tax amendments 2013 14   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Tax amendments 2013 14    You may be able to take a credit for other expenses related to an adoption. Tax amendments 2013 14 See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Tax amendments 2013 14 Child of divorced or separated parents. Tax amendments 2013 14   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Tax amendments 2013 14 Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Tax amendments 2013 14 This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Tax amendments 2013 14 Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, or foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of any of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child, earlier) of any taxpayer for 2013, and For whom you provided over half of the support in 2013. Tax amendments 2013 14 But see Child of divorced or separated parents , earlier, Support claimed under a multiple support agreement, next, and Kidnapped child under Qualifying Relative in Publication 501. Tax amendments 2013 14 Support claimed under a multiple support agreement. Tax amendments 2013 14   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Tax amendments 2013 14 A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Tax amendments 2013 14   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Tax amendments 2013 14 However, you can include the entire unreimbursed amount you paid for medical expenses. Tax amendments 2013 14 Example. Tax amendments 2013 14 You and your three brothers each provide one-fourth of your mother's total support. Tax amendments 2013 14 Under a multiple support agreement, you treat your mother as your dependent. Tax amendments 2013 14 You paid all of her medical expenses. Tax amendments 2013 14 Your brothers repaid you for three-fourths of these expenses. Tax amendments 2013 14 In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Tax amendments 2013 14 Your brothers cannot include any part of the expenses. Tax amendments 2013 14 However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Tax amendments 2013 14 Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Tax amendments 2013 14 This includes expenses for the decedent's spouse and dependents as well as for the decedent. Tax amendments 2013 14 The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Tax amendments 2013 14 The expenses must be paid within the 1-year period beginning with the day after the date of death. Tax amendments 2013 14 If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Tax amendments 2013 14 Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Tax amendments 2013 14 What if the decedent's return had been filed and the medical expenses were not included?   Form 1040X can be filed for the year or years the expenses are treated as paid, unless the period for filing an amended return for that year has passed. Tax amendments 2013 14 Generally, an amended return must be filed within 3 years of the date the original return was filed, or within 2 years from the time the tax was paid, whichever date is later. Tax amendments 2013 14 Example. Tax amendments 2013 14 John properly filed his 2012 income tax return. Tax amendments 2013 14 He died in 2013 with unpaid medical expenses of $1,500 from 2012 and $1,800 in 2013. Tax amendments 2013 14 If the expenses are paid within the 1-year period, his survivor or personal representative can file an amended return for 2012 claiming a deduction based on the $1,500 medical expenses. Tax amendments 2013 14 The $1,800 of medical expenses from 2013 can be included on the decedent's final return for 2013. Tax amendments 2013 14 What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Tax amendments 2013 14 The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Tax amendments 2013 14 What Medical Expenses Are Includible? Following is a list of items that you can include in figuring your medical expense deduction. Tax amendments 2013 14 The items are listed in alphabetical order. Tax amendments 2013 14 This list does not include all possible medical expenses. Tax amendments 2013 14 To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Tax amendments 2013 14 Abortion You can include in medical expenses the amount you pay for a legal abortion. Tax amendments 2013 14 Acupuncture You can include in medical expenses the amount you pay for acupuncture. Tax amendments 2013 14 Alcoholism You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for alcohol addiction. Tax amendments 2013 14 This includes meals and lodging provided by the center during treatment. Tax amendments 2013 14 You can also include in medical expenses amounts you pay for transportation to and from Alcoholics Anonymous meetings in your community if the attendance is pursuant to medical advice that membership in Alcoholics Anonymous is necessary for the treatment of a disease involving the excessive use of alcoholic liquors. Tax amendments 2013 14 Ambulance You can include in medical expenses amounts you pay for ambulance service. Tax amendments 2013 14 Annual Physical Examination See Physical Examination , later. Tax amendments 2013 14 Artificial Limb You can include in medical expenses the amount you pay for an artificial limb. Tax amendments 2013 14 Artificial Teeth You can include in medical expenses the amount you pay for artificial teeth. Tax amendments 2013 14 Bandages You can include in medical expenses the cost of medical supplies such as bandages. Tax amendments 2013 14 Birth Control Pills You can include in medical expenses the amount you pay for birth control pills prescribed by a doctor. Tax amendments 2013 14 Body Scan You can include in medical expenses the cost of an electronic body scan. Tax amendments 2013 14 Braille Books and Magazines You can include in medical expenses the part of the cost of Braille books and magazines for use by a visually impaired person that is more than the cost of regular printed editions. Tax amendments 2013 14 Breast Pumps and Supplies You can include in medical expenses the cost of breast pumps and supplies that assist lactation. Tax amendments 2013 14 Breast Reconstruction Surgery You can include in medical expenses the amounts you pay for breast reconstruction surgery, as well as breast prosthesis, following a mastectomy for cancer. Tax amendments 2013 14 See Cosmetic Surgery , later. Tax amendments 2013 14 Capital Expenses You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. Tax amendments 2013 14 The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. Tax amendments 2013 14 The cost of the improvement is reduced by the increase in the value of your property. Tax amendments 2013 14 The difference is a medical expense. Tax amendments 2013 14 If the value of your property is not increased by the improvement, the entire cost is included as a medical expense. Tax amendments 2013 14 Certain improvements made to accommodate a home to your disabled condition, or that of your spouse or your dependents who live with you, do not usually increase the value of the home and the cost can be included in full as medical expenses. Tax amendments 2013 14 These improvements include, but are not limited to, the following items. Tax amendments 2013 14 Constructing entrance or exit ramps for your home. Tax amendments 2013 14 Widening doorways at entrances or exits to your home. Tax amendments 2013 14 Widening or otherwise modifying hallways and interior doorways. Tax amendments 2013 14 Installing railings, support bars, or other modifications to bathrooms. Tax amendments 2013 14 Lowering or modifying kitchen cabinets and equipment. Tax amendments 2013 14 Moving or modifying electrical outlets and fixtures. Tax amendments 2013 14 Installing porch lifts and other forms of lifts (but elevators generally add value to the house). Tax amendments 2013 14 Modifying fire alarms, smoke detectors, and other warning systems. Tax amendments 2013 14 Modifying stairways. Tax amendments 2013 14 Adding handrails or grab bars anywhere (whether or not in bathrooms). Tax amendments 2013 14 Modifying hardware on doors. Tax amendments 2013 14 Modifying areas in front of entrance and exit doorways. Tax amendments 2013 14 Grading the ground to provide access to the residence. Tax amendments 2013 14 Only reasonable costs to accommodate a home to a disabled condition are considered medical care. Tax amendments 2013 14 Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. Tax amendments 2013 14 Capital expense worksheet. Tax amendments 2013 14   Use Worksheet A to figure the amount of your capital expense to include in your medical expenses. Tax amendments 2013 14 Worksheet A. Tax amendments 2013 14 Capital Expense Worksheet Instructions: Use this worksheet to figure the amount, if any, of your medical expenses due to a home improvement. Tax amendments 2013 14 1. Tax amendments 2013 14 Enter the amount you paid for the home improvement 1. Tax amendments 2013 14   2. Tax amendments 2013 14 Enter the value of your home immediately after the improvement 2. Tax amendments 2013 14       3. Tax amendments 2013 14 Enter the value of your home immediately before the improvement 3. Tax amendments 2013 14       4. Tax amendments 2013 14 Subtract line 3 from line 2. Tax amendments 2013 14 This is the increase in the value of your home due to the improvement 4. Tax amendments 2013 14     • If line 4 is more than or equal to line 1, you have no medical expenses due to the home improvement; stop here. Tax amendments 2013 14       • If line 4 is less than line 1, go to line 5. Tax amendments 2013 14     5. Tax amendments 2013 14 Subtract line 4 from line 1. Tax amendments 2013 14 These are your medical expenses due to the home improvement 5. Tax amendments 2013 14   Operation and upkeep. Tax amendments 2013 14   Amounts you pay for operation and upkeep of a capital asset qualify as medical expenses, as long as the main reason for them is medical care. Tax amendments 2013 14 This rule applies even if none or only part of the original cost of the capital asset qualified as a medical care expense. Tax amendments 2013 14 Improvements to property rented by a person with a disability. Tax amendments 2013 14   Amounts paid to buy and install special plumbing fixtures for a person with a disability, mainly for medical reasons, in a rented house are medical expenses. Tax amendments 2013 14 Example. Tax amendments 2013 14 John has arthritis and a heart condition. Tax amendments 2013 14 He cannot climb stairs or get into a bathtub. Tax amendments 2013 14 On his doctor's advice, he installs a bathroom with a shower stall on the first floor of his two-story rented house. Tax amendments 2013 14 The landlord did not pay any of the cost of buying and installing the special plumbing and did not lower the rent. Tax amendments 2013 14 John can include in medical expenses the entire amount he paid. Tax amendments 2013 14 Car You can include in medical expenses the cost of special hand controls and other special equipment installed in a car for the use of a person with a disability. Tax amendments 2013 14 Special design. Tax amendments 2013 14   You can include in medical expenses the difference between the cost of a regular car and a car specially designed to hold a wheelchair. Tax amendments 2013 14 Cost of operation. Tax amendments 2013 14   The includible costs of using a car for medical reasons are explained under Transportation , later. Tax amendments 2013 14 Chiropractor You can include in medical expenses fees you pay to a chiropractor for medical care. Tax amendments 2013 14 Christian Science Practitioner You can include in medical expenses fees you pay to Christian Science practitioners for medical care. Tax amendments 2013 14 Contact Lenses You can include in medical expenses amounts you pay for contact lenses needed for medical reasons. Tax amendments 2013 14 You can also include the cost of equipment and materials required for using contact lenses, such as saline solution and enzyme cleaner. Tax amendments 2013 14 See Eyeglasses and Eye Surgery , later. Tax amendments 2013 14 Crutches You can include in medical expenses the amount you pay to buy or rent crutches. Tax amendments 2013 14 Dental Treatment You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Tax amendments 2013 14 Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Tax amendments 2013 14 Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments. Tax amendments 2013 14 But see Teeth Whitening under What Expenses Are Not Includible, later. Tax amendments 2013 14 Diagnostic Devices You can include in medical expenses the cost of devices used in diagnosing and treating illness and disease. Tax amendments 2013 14 Example. Tax amendments 2013 14 You have diabetes and use a blood sugar test kit to monitor your blood sugar level. Tax amendments 2013 14 You can include the cost of the blood sugar test kit in your medical expenses. Tax amendments 2013 14 Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Tax amendments 2013 14 (See Publication 503, Child and Dependent Care Expenses. Tax amendments 2013 14 ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Tax amendments 2013 14 Drug Addiction You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for drug addiction. Tax amendments 2013 14 This includes meals and lodging at the center during treatment. Tax amendments 2013 14 Drugs See Medicines , later. Tax amendments 2013 14 Eye Exam You can include in medical expenses the amount you pay for eye examinations. Tax amendments 2013 14 Eyeglasses You can include in medical expenses amounts you pay for eyeglasses and contact lenses needed for medical reasons. Tax amendments 2013 14 See Contact Lenses , earlier, for more information. Tax amendments 2013 14 Eye Surgery You can include in medical expenses the amount you pay for eye surgery to treat defective vision, such as laser eye surgery or radial keratotomy. Tax amendments 2013 14 Fertility Enhancement You can include in medical expenses the cost of the following procedures to overcome an inability to have children. Tax amendments 2013 14 Procedures such as in vitro fertilization (including temporary storage of eggs or sperm). Tax amendments 2013 14 Surgery, including an operation to reverse prior surgery that prevented the person operated on from having children. Tax amendments 2013 14 Founder's Fee See Lifetime Care—Advance Payments , later. Tax amendments 2013 14 Guide Dog or Other Service Animal You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. Tax amendments 2013 14 In general, this includes any costs, such as food, grooming, and veterinary care, incurred in maintaining the health and vitality of the service animal so that it may perform its duties. Tax amendments 2013 14 Health Institute You can include in medical expenses fees you pay for treatment at a health institute only if the treatment is prescribed by a physician and the physician issues a statement that the treatment is necessary to alleviate a physical or mental defect or illness of the individual receiving the treatment. Tax amendments 2013 14 Health Maintenance Organization (HMO) You can include in medical expenses amounts you pay to entitle you, your spouse, or a dependent to receive medical care from an HMO. Tax amendments 2013 14 These amounts are treated as medical insurance premiums. Tax amendments 2013 14 See Insurance Premiums , later. Tax amendments 2013 14 Hearing Aids You can include in medical expenses the cost of a hearing aid and batteries, repairs, and maintenance needed to operate it. Tax amendments 2013 14 Home Care See Nursing Services , later. Tax amendments 2013 14 Home Improvements See Capital Expenses , earlier. Tax amendments 2013 14 Hospital Services You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. Tax amendments 2013 14 This includes amounts paid for meals and lodging. Tax amendments 2013 14 Also see Lodging , later. Tax amendments 2013 14 Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Tax amendments 2013 14 Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Tax amendments 2013 14 See Qualified Long-Term Care Insurance Contracts under Long-Term Care, later. Tax amendments 2013 14 If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Tax amendments 2013 14 The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Tax amendments 2013 14 Health coverage tax credit. Tax amendments 2013 14   If, during 2013, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient, you must complete Form 8885 before completing Schedule A. Tax amendments 2013 14 When figuring the amount of insurance premiums you can deduct on Schedule A, do not include: Any amounts you included on Form 8885, Any qualified health insurance premiums you paid to “U. Tax amendments 2013 14 S. Tax amendments 2013 14 Treasury–HCTC,” or Any health coverage tax credit advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Tax amendments 2013 14 Employer-Sponsored Health Insurance Plan Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included on your Form W-2, Wage and Tax Statement. Tax amendments 2013 14 Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included on your Form W-2. Tax amendments 2013 14 Example. Tax amendments 2013 14 You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Tax amendments 2013 14 Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Tax amendments 2013 14 Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Tax amendments 2013 14 Long-term care services. Tax amendments 2013 14   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Tax amendments 2013 14 This amount will be reported as wages on your Form W-2. Tax amendments 2013 14 Retired public safety officers. Tax amendments 2013 14   If you are a retired public safety officer, do not include as medical expenses any health or long-term care insurance premiums that you elected to have paid with tax-free distributions from a retirement plan. Tax amendments 2013 14 This applies only to distributions that would otherwise be included in income. Tax amendments 2013 14 Health reimbursement arrangement (HRA). Tax amendments 2013 14   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Tax amendments 2013 14 This is because an HRA is funded solely by the employer. Tax amendments 2013 14 Medicare A If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Tax amendments 2013 14 The payroll tax paid for Medicare A is not a medical expense. Tax amendments 2013 14 If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Tax amendments 2013 14 In this situation you can include the premiums you paid for Medicare A as a medical expense. Tax amendments 2013 14 Medicare B Medicare B is a supplemental medical insurance. Tax amendments 2013 14 Premiums you pay for Medicare B are a medical expense. Tax amendments 2013 14 Check the information you received from the Social Security Administration to find out your premium. Tax amendments 2013 14 Medicare D Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Tax amendments 2013 14 You can include as a medical expense premiums you pay for Medicare D. Tax amendments 2013 14 Prepaid Insurance Premiums Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Tax amendments 2013 14 Unused Sick Leave Used To Pay Premiums You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Tax amendments 2013 14 You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Tax amendments 2013 14 You can include this cost of continuing participation in the health plan as a medical expense. Tax amendments 2013 14 If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Tax amendments 2013 14 You cannot include this cost of continuing participation in that health plan as a medical expense. Tax amendments 2013 14 Insurance Premiums You Cannot Include You cannot include premiums you pay for: Life insurance policies, Policies providing payment for loss of earnings, Policies for loss of life, limb, sight, etc. Tax amendments 2013 14 , Policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury, The part of your car insurance that provides medical insurance coverage for all persons injured in or by your car because the part of the premium providing insurance for you, your spouse, and your dependents is not stated separately from the part of the premium providing insurance for medical care for others, or Health or long-term care insurance if you elected to pay these premiums with tax-free distributions from a retirement plan made directly to the insurance provider and these distributions would otherwise have been included in income. Tax amendments 2013 14 Taxes imposed by any governmental unit, such as Medicare taxes, are not insurance premiums. Tax amendments 2013 14 Coverage for nondependents. Tax amendments 2013 14   Generally, you cannot deduct any additional premium you pay as the result of including on your policy someone who is not your spouse or dependent, even if that person is your child under age 27. Tax amendments 2013 14 However, you can deduct the additional premium if that person is: Your child whom you do not claim as a dependent because of the rules for children of divorced or separated parents, Any person you could have claimed as a dependent on your return except that person received $3,900 or more of gross income or filed a joint return, or Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's 2013 return. Tax amendments 2013 14  Also, if you had family coverage when you added this individual to your policy and your premiums did not increase, you can enter on Schedule A (Form 1040) the full amount of your medical and dental insurance premiums. Tax amendments 2013 14 Intellectually and Developmentally Disabled, Special Home for You can include in medical expenses the cost of keeping a person who is intellectually and developmentally disabled in a special home, not the home of a relative, on the recommendation of a psychiatrist to help the person adjust from life in a mental hospital to community living. Tax amendments 2013 14 Laboratory Fees You can include in medical expenses the amounts you pay for laboratory fees that are part of medical care. Tax amendments 2013 14 Lactation Expenses See Breast Pumps and Supplies , earlier. Tax amendments 2013 14 Lead-Based Paint Removal You can include in medical expenses the cost of removing lead-based paints from surfaces in your home to prevent a child who has or had lead poisoning from eating the paint. Tax amendments 2013 14 These surfaces must be in poor repair (peeling or cracking) or within the child's reach. Tax amendments 2013 14 The cost of repainting the scraped area is not a medical expense. Tax amendments 2013 14 If, instead of removing the paint, you cover the area with wallboard or paneling, treat these items as capital expenses. Tax amendments 2013 14 See Capital Expenses , earlier. Tax amendments 2013 14 Do not include the cost of painting the wallboard as a medical expense. Tax amendments 2013 14 Learning Disability See Special Education , later. Tax amendments 2013 14 Legal Fees You can include in medical expenses legal fees you paid that are necessary to authorize treatment for mental illness. Tax amendments 2013 14 However, you cannot include in medical expenses fees for the management of a guardianship estate, fees for conducting the affairs of the person being treated, or other fees that are not necessary for medical care. Tax amendments 2013 14 Lifetime Care—Advance Payments You can include in medical expenses a part of a life-care fee or “founder's fee” you pay either monthly or as a lump sum under an agreement with a retirement home. Tax amendments 2013 14 The part of the payment you include is the amount properly allocable to medical care. Tax amendments 2013 14 The agreement must require that you pay a specific fee as a condition for the home's promise to provide lifetime care that includes medical care. Tax amendments 2013 14 You can use a statement from the retirement home to prove the amount properly allocable to medical care. Tax amendments 2013 14 The statement must be based either on the home's prior experience or on information from a comparable home. Tax amendments 2013 14 Dependents with disabilities. Tax amendments 2013 14   You can include in medical expenses advance payments to a private institution for lifetime care, treatment, and training of your physically or mentally impaired child upon your death or when you become unable to provide care. Tax amendments 2013 14 The payments must be a condition for the institution's future acceptance of your child and must not be refundable. Tax amendments 2013 14 Payments for future medical care. Tax amendments 2013 14   Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. Tax amendments 2013 14 This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care of the type described earlier. Tax amendments 2013 14 Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. Tax amendments 2013 14 See Nursing Home , later. Tax amendments 2013 14 You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Tax amendments 2013 14 You can include the cost of such lodging while away from home if all of the following requirements are met. Tax amendments 2013 14 The lodging is primarily for and essential to medical care. Tax amendments 2013 14 The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Tax amendments 2013 14 The lodging is not lavish or extravagant under the circumstances. Tax amendments 2013 14 There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Tax amendments 2013 14 The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Tax amendments 2013 14 You can include lodging for a person traveling with the person receiving the medical care. Tax amendments 2013 14 For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Tax amendments 2013 14 Meals are not included. Tax amendments 2013 14 Do not include the cost of lodging while away from home for medical treatment if that treatment is not received from a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital or if that lodging is not primarily for or essential to the medical care received. Tax amendments 2013 14 Long-Term Care You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. Tax amendments 2013 14 Qualified Long-Term Care Services Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: Required by a chronically ill individual, and Provided pursuant to a plan of care prescribed by a licensed health care practitioner. Tax amendments 2013 14 Chronically ill individual. Tax amendments 2013 14   An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. Tax amendments 2013 14 He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Tax amendments 2013 14 Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Tax amendments 2013 14 He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Tax amendments 2013 14 Maintenance and personal care services. Tax amendments 2013 14    Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment). Tax amendments 2013 14 Qualified Long-Term Care Insurance Contracts A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. Tax amendments 2013 14 The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses. Tax amendments 2013 14 The amount of qualified long-term care premiums you can include is limited. Tax amendments 2013 14 You can include the following as medical expenses on Schedule A (Form 1040). Tax amendments 2013 14 Qualified long-term care premiums up to the following amounts. Tax amendments 2013 14 Age 40 or under – $360. Tax amendments 2013 14 Age 41 to 50 – $680. Tax amendments 2013 14 Age 51 to 60 – $1,360. Tax amendments 2013 14 Age 61 to 70 – $3,640. Tax amendments 2013 14 Age 71 or over – $4,550. Tax amendments 2013 14 Unreimbursed expenses for qualified long-term care services. Tax amendments 2013 14 Note. Tax amendments 2013 14 The limit on premiums is for each person. Tax amendments 2013 14 Also, if you are an eligible retired public safety officer, you cannot include premiums for long-term care insurance if you elected to pay these premiums with tax-free distributions from a qualified retirement plan made directly to the insurance provider and these distributions would otherwise have been included in your income. Tax amendments 2013 14 Meals You can include in medical expenses the cost of meals at a hospital or similar institution if a principal reason for being there is to get medical care. Tax amendments 2013 14 You cannot include in medical expenses the cost of meals that are not part of inpatient care. Tax amendments 2013 14 Also see Weight-Loss Program and Nutritional Supplements , later. Tax amendments 2013 14 Medical Conferences You can include in medical expenses amounts paid for admission and transportation to a medical conference if the medical conference concerns the chronic illness of yourself, your spouse, or your dependent. Tax amendments 2013 14 The costs of the medical conference must be primarily for and necessary to the medical care of you, your spouse, or your dependent. Tax amendments 2013 14 The majority of the time spent at the conference must be spent attending sessions on medical information. Tax amendments 2013 14 The cost of meals and lodging while attending the conference is not deductible as a medical expense. Tax amendments 2013 14 Medical Information Plan You can include in medical expenses amounts paid to a plan that keeps medical information in a computer data bank and retrieves and furnishes the information upon request to an attending physician. Tax amendments 2013 14 Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. Tax amendments 2013 14 A prescribed drug is one that requires a prescription by a doctor for its use by an individual. Tax amendments 2013 14 You can also include amounts you pay for insulin. Tax amendments 2013 14 Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Tax amendments 2013 14 Imported medicines and drugs. Tax amendments 2013 14   If you imported medicines or drugs from other countries, see Medicines and Drugs From Other Countries , under What Expenses Are Not Includible, later. Tax amendments 2013 14 Nursing Home You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Tax amendments 2013 14 This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Tax amendments 2013 14 Do not include the cost of meals and lodging if the reason for being in the home is personal. Tax amendments 2013 14 You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Tax amendments 2013 14 Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. Tax amendments 2013 14 The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. Tax amendments 2013 14 This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. Tax amendments 2013 14 These services can be provided in your home or another care facility. Tax amendments 2013 14 Generally, only the amount spent for nursing services is a medical expense. Tax amendments 2013 14 If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services. Tax amendments 2013 14 For example, because of your medical condition you pay a visiting nurse $300 per week for medical and household services. Tax amendments 2013 14 She spends 10% of her time doing household services such as washing dishes and laundry. Tax amendments 2013 14 You can include only $270 per week as medical expenses. Tax amendments 2013 14 The $30 (10% × $300) allocated to household services cannot be included. Tax amendments 2013 14 However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Tax amendments 2013 14 See Maintenance and personal care services under Long-Term Care, earlier. Tax amendments 2013 14 Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. Tax amendments 2013 14 See Publication 503. Tax amendments 2013 14 You can also include in medical expenses part of the amount you pay for that attendant's meals. Tax amendments 2013 14 Divide the food expense among the household members to find the cost of the attendant's food. Tax amendments 2013 14 Then divide that cost in the same manner as in the preceding paragraph. Tax amendments 2013 14 If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. Tax amendments 2013 14 This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. Tax amendments 2013 14 Employment taxes. Tax amendments 2013 14   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for an attendant who provides medical care. Tax amendments 2013 14 If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier. Tax amendments 2013 14 For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. Tax amendments 2013 14 Operations You can include in medical expenses amounts you pay for legal operations that are not for unnecessary cosmetic surgery. Tax amendments 2013 14 See Cosmetic Surgery under What Expenses Are Not Includible, later. Tax amendments 2013 14 Optometrist See Eyeglasses , earlier. Tax amendments 2013 14 Organ Donors See Transplants , later. Tax amendments 2013 14 Osteopath You can include in medical expenses amounts you pay to an osteopath for medical care. Tax amendments 2013 14 Oxygen You can include in medical expenses amounts you pay for oxygen and oxygen equipment to relieve breathing problems caused by a medical condition. Tax amendments 2013 14 Physical Examination You can include in medical expenses the amount you pay for an annual physical examination and diagnostic tests by a physician. Tax amendments 2013 14 You do not have to be ill at the time of the examination. Tax amendments 2013 14 Pregnancy Test Kit You can include in medical expenses the amount you pay to purchase a pregnancy test kit to determine if you are pregnant. Tax amendments 2013 14 Prosthesis See Artificial Limb and Breast Reconstruction Surgery , earlier. Tax amendments 2013 14 Psychiatric Care You can include in medical expenses amounts you pay for psychiatric care. Tax amendments 2013 14 This includes the cost of supporting a mentally ill dependent at a specially equipped medical center where the dependent receives medical care. Tax amendments 2013 14 See Psychoanalysis, next, and Transportation , later. Tax amendments 2013 14 Psychoanalysis You can include in medical expenses payments for psychoanalysis. Tax amendments 2013 14 However, you cannot include payments for psychoanalysis that is part of required training to be a psychoanalyst. Tax amendments 2013 14 Psychologist You can include in medical expenses amounts you pay to a psychologist for medical care. Tax amendments 2013 14 Special Education You can include in medical expenses fees you pay on a doctor's recommendation for a child's tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders. Tax amendments 2013 14 You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. Tax amendments 2013 14 A doctor must recommend that the child attend the school. Tax amendments 2013 14 Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Tax amendments 2013 14 Special education includes: Teaching Braille to a visually impaired person, Teaching lip reading to a hearing disabled person, or Giving remedial language training to correct a condition caused by a birth defect. Tax amendments 2013 14 Sterilization You can include in medical expenses the cost of a legal sterilization (a legally performed operation to make a person unable to have children). Tax amendments 2013 14 Also see Vasectomy , later. Tax amendments 2013 14 Stop-Smoking Programs You can include in medical expenses amounts you pay for a program to stop smoking. Tax amendments 2013 14 However, you cannot include in medical expenses amounts you pay for drugs that do not require a prescription, such as nicotine gum or patches, that are designed to help stop smoking. Tax amendments 2013 14 Surgery See Operations , earlier. Tax amendments 2013 14 Telephone You can include in medical expenses the cost of special telephone equipment that lets a person who is deaf, hard of hearing or has a speech disability communicate over a regular telephone. Tax amendments 2013 14 This includes teletypewriter (TTY) and telecommunications device for the deaf (TDD) equipment. Tax amendments 2013 14 You can also include the cost of repairing the equipment. Tax amendments 2013 14 Television You can include in medical expenses the cost of equipment that displays the audio part of television programs as subtitles for persons with a hearing disability. Tax amendments 2013 14 This may be the cost of an adapter that attaches to a regular set. Tax amendments 2013 14 It also may be the part of the cost of a specially equipped television that exceeds the cost of the same model regular television set. Tax amendments 2013 14 Therapy You can include in medical expenses amounts you pay for therapy received as medical treatment. Tax amendments 2013 14 Transplants You can include in medical expenses amounts paid for medical care you receive because you are a donor or a possible donor of a kidney or other organ. Tax amendments 2013 14 This includes transportation. Tax amendments 2013 14 You can include any expenses you pay for the medical care of a donor in connection with the donating of an organ. Tax amendments 2013 14 This includes transportation. Tax amendments 2013 14 Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Tax amendments 2013 14 You can include:    Bus, taxi, train, or plane fares or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Tax amendments 2013 14 Car expenses. Tax amendments 2013 14   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. Tax amendments 2013 14 You cannot include depreciation, insurance, general repair, or maintenance expenses. Tax amendments 2013 14   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents a mile. Tax amendments 2013 14    You can also include parking fees and tolls. Tax amendments 2013 14 You can add these fees and tolls to your medical expenses whether you use actual expenses or the standard mileage rate. Tax amendments 2013 14 Example. Tax amendments 2013 14 In 2013, Bill Jones drove 2,800 miles for medical reasons. Tax amendments 2013 14 He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Tax amendments 2013 14 He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Tax amendments 2013 14 He figures the actual expenses first. Tax amendments 2013 14 He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Tax amendments 2013 14 He then figures the standard mileage amount. Tax amendments 2013 14 He multiplies 2,800 miles by 24 cents a mile for a total of $672. Tax amendments 2013 14 He then adds the $100 tolls and parking for a total of $772. Tax amendments 2013 14 Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Tax amendments 2013 14 Transportation expenses you cannot include. Tax amendments 2013 14    You cannot include in medical expenses the cost of transportation in the following situations. Tax amendments 2013 14 Going to and from work, even if your condition requires an unusual means of transportation. Tax amendments 2013 14 Travel for purely personal reasons to another city for an operation or other medical care. Tax amendments 2013 14 Travel that is merely for the general improvement of one's health. Tax amendments 2013 14 The costs of operating a specially equipped car for other than medical reasons. Tax amendments 2013 14 Trips You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. Tax amendments 2013 14 You may be able to include up to $50 for each night for each person. Tax amendments 2013 14 You can include lodging for a person traveling with the person receiving the medical care. Tax amendments 2013 14 For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Tax amendments 2013 14 Meals are not included. Tax amendments 2013 14 See Lodging , earlier. Tax amendments 2013 14 You cannot include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. Tax amendments 2013 14 However, see Medical Conferences , earlier. Tax amendments 2013 14 Tuition Under special circumstances, you can include charges for tuition in medical expenses. Tax amendments 2013 14 See Special Education , earlier. Tax amendments 2013 14 You can include charges for a health plan included in a lump-sum tuition fee if the charges are separately stated or can easily be obtained from the school. Tax amendments 2013 14 Vasectomy You can include in medical expenses the amount you pay for a vasectomy. Tax amendments 2013 14 Vision Correction Surgery See Eye Surgery , earlier. Tax amendments 2013 14 Weight-Loss Program You can include in medical expenses amounts you pay to lose weight if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Tax amendments 2013 14 This includes fees you pay for membership in a weight reduction group as well as fees for attendance at periodic meetings. Tax amendments 2013 14 You cannot include membership dues in a gym, health club, or spa as medical expenses, but you can include separate fees charged there for weight loss activities. Tax amendments 2013 14 You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. Tax amendments 2013 14 You can include the cost of special food in medical expenses only if: The food does not satisfy normal nutritional needs, The food alleviates or treats an illness, and The need for the food is substantiated by a physician. Tax amendments 2013 14 The amount you can include in medical expenses is limited to the amount by which the cost of the special food exceeds the cost of a normal diet. Tax amendments 2013 14 See also Weight-Loss Program under What Expenses Are Not Includible, later. Tax amendments 2013 14 Wheelchair You can include in medical expenses amounts you pay for a wheelchair used mainly for the relief of sickness or disability, and not just to provide transportation to and from work. Tax amendments 2013 14 The cost of operating and maintaining the wheelchair is also a medical expense. Tax amendments 2013 14 Wig You can include in medical expenses the cost of a wig purchased upon the advice of a physician for the mental health of a patient who has lost all of his or her hair from disease. Tax amendments 2013 14 X-ray You can include in medical expenses amounts you pay for X-rays for medical reasons. Tax amendments 2013 14 What Expenses Are Not Includible? Following is a list of some items that you cannot include in figuring your medical expense deduction. Tax amendments 2013 14 The items are listed in alphabetical order. Tax amendments 2013 14 Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby You cannot include in medical expenses amounts you pay for the care of children, even if the expenses enable you, your spouse, or your dependent to get medical or dental treatment. Tax amendments 2013 14 Also, any expense allowed as a childcare credit cannot be treated as an expense paid for medical care. Tax amendments 2013 14 Controlled Substances You cannot include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc. Tax amendments 2013 14 ), even if such substances are legalized by state law. Tax amendments 2013 14 Such substances are not legal under federal law and cannot be included in medical expenses. Tax amendments 2013 14 Cosmetic Surgery Generally, you cannot include in medical expenses the amount you pay for unnecessary cosmetic surgery. Tax amendments 2013 14 This includes any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. Tax amendments 2013 14 You generally cannot include in medical expenses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis), and liposuction. Tax amendments 2013 14 You can include in medical expenses the amount you pay for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. Tax amendments 2013 14 Example. Tax amendments 2013 14 An individual undergoes surgery that removes a breast as part of treatment for cancer. Tax amendments 2013 14 She pays a surgeon to reconstruct the breast. Tax amendments 2013 14 The surgery to reconstruct the breast corrects a deformity directly related to the disease. Tax amendments 2013 14 The cost of the surgery is includible in her medical expenses. Tax amendments 2013 14 Dancing Lessons You cannot include in medical expenses the cost of dancing lessons, swimming lessons, etc. Tax amendments 2013 14 , even if they are recommended by a doctor, if they are only for the improvement of general health. Tax amendments 2013 14 Diaper Service You cannot include in medical expenses the amount you pay for diapers or diaper services, unless they are needed to relieve the effects of a particular disease. Tax amendments 2013 14 Electrolysis or Hair Removal See Cosmetic Surgery , earlier. Tax amendments 2013 14 Flexible Spending Account You cannot include in medical expenses amounts for which you are fully reimbursed by your flexible spending account if you contribute a part of your income on a pre-tax basis to pay for the qualified benefit. Tax amendments 2013 14 Funeral Expenses You cannot include in medical expenses amounts you pay for funerals. Tax amendments 2013 14 Future Medical Care Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. Tax amendments 2013 14 This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care or long-term care of the type described at Lifetime Care—Advance Payments or Long-Term Care, earlier under What Medical Expenses Are Includible. Tax amendments 2013 14 Hair Transplant See Cosmetic Surgery , earlier. Tax amendments 2013 14 Health Club Dues You cannot include in medical expenses health club dues or amounts paid to improve one's general health or to relieve physical or mental discomfort not related to a particular medical condition. Tax amendments 2013 14 You cannot include in medical expenses the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Tax amendments 2013 14 Health Coverage Tax Credit You cannot include in medical expenses amounts you pay for health insurance that you use in figuring your health coverage tax credit. Tax amendments 2013 14 For more information, see Health Coverage Tax Credit , later. Tax amendments 2013 14 Health Savings Accounts You cannot include in medical expenses any payment or distribution for medical expenses out of a health savings account. Tax amendments 2013 14 Contributions to health savings accounts are deducted separately. Tax amendments 2013 14 See Publication 969. Tax amendments 2013 14 Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. Tax amendments 2013 14 This is a personal expense that is not deductible. Tax amendments 2013 14 However, you may be able to include certain expenses paid to a person providing nursing-type services. Tax amendments 2013 14 For more information, see Nursing Services , earlier under What Medical Expenses Are Includible. Tax amendments 2013 14 Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Tax amendments 2013 14 For more information, see Long-Term Care , earlier under What Medical Expenses Are Includible. Tax amendments 2013 14 Illegal Operations and Treatments You cannot include in medical expenses amounts you pay for illegal operations, treatments, or controlled substances whether rendered or prescribed by licensed or unlicensed practitioners. Tax amendments 2013 14 Insurance Premiums See Insurance Premiums under What Medical Expenses Are Includible, earlier. Tax amendments 2013 14 Maternity Clothes You cannot include in medical expenses amounts you pay for maternity clothes. Tax amendments 2013 14 Medical Savings Account (MSA) You cannot include in medical expenses amounts you contribute to an Archer MSA. Tax amendments 2013 14 You cannot include expenses you pay for with a tax-free distribution from your Archer MSA. Tax amendments 2013 14 You also cannot use other funds equal to the amount of the distribution and include the expenses. Tax amendments 2013 14 For more information on Archer MSAs, see Publication 969. Tax amendments 2013 14 Medicines and Drugs From Other Countries In general, you cannot include in your medical expenses the cost of a prescribed drug brought in (or ordered shipped) from another country. Tax amendments 2013 14 You can only include the cost of a drug that was imported legally. Tax amendments 2013 14 For example, you can include the cost of a prescribed drug the Food and Drug Administration announces can be legally imported by individuals. Tax amendments 2013 14 You can include the cost of a prescribed drug you purchase and consume in another country if the drug is legal in both the other country and the United States. Tax amendments 2013 14 Nonprescription Drugs and Medicines Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Tax amendments 2013 14 Example. Tax amendments 2013 14 Your doctor recommends that you take aspirin. Tax amendments 2013 14 Because aspirin is a drug that does not require a physician's prescription, you cannot include its cost in your medical expenses. Tax amendments 2013 14 Nutritional Supplements You cannot include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Tax amendments 2013 14 unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. Tax amendments 2013 14 Otherwise, these items are taken to maintain your ordinary good health, and are not for medical care. Tax amendments 2013 14 Personal Use Items You cannot include in medical expenses the cost of an item ordinarily used for personal, living, or family purposes unless it is used primarily to prevent or alleviate a physical or mental defect or illness. Tax amendments 2013 14 For example, the cost of a toothbrush and toothpaste is a nondeductible personal expense. Tax amendments 2013 14 In order to accommodate an individual with a physical defect, you may have to purchase an item ordinarily used as a personal, living, or family item in a special form. Tax amendments 2013 14 You can include the excess of the cost of the item in a special form over the cost of the item in normal form as a medical expense. Tax amendments 2013 14 (See Braille Books and Magazines under What Medical Expenses Are Includible, earlier. Tax amendments 2013 14 ) Swimming Lessons See Dancing Lessons , earlier. Tax amendments 2013 14 Teeth Whitening You cannot include in medical expenses amounts paid to whiten teeth. Tax amendments 2013 14 See Cosmetic Surgery , earlier. Tax amendments 2013 14 Veterinary Fees You generally cannot include veterinary fees in your medical expenses, but see Guide Dog or Other Service Animal under What Medical Expenses Are Includible, earlier. Tax amendments 2013 14 Weight-Loss Program You cannot include in medical expenses the cost of a weight-loss program if the purpose of the weight loss is the improvement of appearance, general health, or sense of well-being. Tax amendments 2013 14 You cannot include amounts you pay to lose weight unless the weight loss is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Tax amendments 2013 14 If the weight-loss treatment is not for a specific disease diagnosed by a physician, you cannot include either the fees you pay for membership in a weight reduction group or fees for attendance at periodic meetings. Tax amendments 2013 14 Also, you cannot include membership dues in a gym, health club, or spa. Tax amendments 2013 14 You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. Tax amendments 2013 14 See Weight-Loss Program under What Medical Expenses Are Includible, earlier. Tax amendments 2013 14 How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the tax year for which you received no insurance or other reimbursement. Tax amendments 2013 14 Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Tax amendments 2013 14 This includes payments from Medicare. Tax amendments 2013 14 Even if a policy provides reimbursement only for certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Tax amendments 2013 14 Example. Tax amendments 2013 14 You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Tax amendments 2013 14 The insurance you receive for the hospital and doctors' bills is more than their charges. Tax amendments 2013 14 In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Tax amendments 2013 14 Health reimbursement arrange