If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct medical expenses. Here are some things to keep in mind:
• You may deduct the amount of medical expenses that exceed 7.5% of your adjusted gross income. Starting in 2013 as part of the new health care law, the threshold will increase to 10%.
• You can only deduct medical expenses you actually paid during the year, minus any reimbursements.
• You can deduct expenses you pay for yourself, spouse, and dependents. If you’re divorced or separated, each parent can deduct the medical expenses he or she actually pays for a child, even if the child is not claimed as a dependent.
• You can deduct transportation and traveling costs to a health care facility. Transportation costs include mileage, tolls, and parking fees.
• Lodging is deductible if the trip is primarily for and essential to medical care. Lodging expenses for a person accompanying the individual seeking medical care is also deductible, but meals are not deductible. The deduction is limited to $50 per night per individual.
• Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses with the proceeds.
• Medical expenses are those that are for the prevention or alleviation of a physical or mental defect or illness. This includes payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure of the body. The following types do qualify:
o You can deduct the costs of health insurance, dental insurance, long-term care, and long-term care insurance.
o Medicines prescribed by a medical professional. Insulin does not need a prescription, but is deductible.
o Costs for medical devices, equipment, and supplies, such as eyeglasses and wheelchairs, as prescribed by a medical professional.
o Co-pays for doctors, dental visits, and eye exams qualify as medical expenses.
o Weight-loss programs are only deductible if it is prescribed by a physician to treat a specific disease. You can include the cost of special food only if the food does not satisfy normal nutritional needs, the food alleviates or treats an illness, and a physician confirmed the need for the food.
The following types do not qualify:
o Over the counter medicines and treatments, nutritional supplements, vitamins, and first aid supplies do not qualify unless specifically prescribed by a medical professional. Medications obtained from another country cannot be deducted as medical expenses.
o Medical marijuana or other controlled substances are not deductible as medical expenses, even if your state allows it.
o Gym memberships, teeth whitening, and cosmetic surgery that is only cosmetic in nature is not deductible.
Wednesday, September 28, 2011
Emergency Preparedness
An ounce of prevention is worth a pound of cure – emergency preparedness for small businesses
Small business owners are some of the busiest people in America, so it’s easy to just look at the most pressing, immediate business concerns. But as natural and man-made disasters seem to be happening with increased regularity, it seems it’s just a matter of time before a disaster comes knocking on your door. FEMA publishes a guide to help businesses prepare for emergencies. For a copy of the full guide, visit http://www.fema.gov/pdf/business/guide/bizindst.pdf. Below is a summary of their approach.
There are four steps in the planning process:
1. Establish a planning team
a. Form the team – the size of the team will depend on the needs, size, and resources of your company
b. Establish authority – demonstrate owner’s commitment and promote an atmosphere of cooperation by giving the planning team authority to take the necessary steps to implement an emergency plan
c. Issue a mission statement – your statement should define the purpose of the plan, indicate it will involve the whole organization, and define the authority and structure of the planning group
d. Establish a schedule and budget – establish a work schedule, planning deadlines, and an initial budget
2. Analyze capabilities and hazards
a. Where do you stand right now?
i. Review internal plans and policies
ii. Meet with outside groups, such as a community emergency management office, the fire or police department, and telephone and utility companies
iii. Identify codes and regulations, such as occupational safety and health regulations, environmental regulations, fire codes, seismic safety codes, and zoning regulations
iv. Identify critical products, services, and operations to assess the impact of potential emergencies and to determine the need for backup systems
v. Identify internal resources and capabilities that could be needed in an emergency, including personnel, equipment, facilities, and backup systems
vi. Identify external resources that could be needed in an emergency, such as the fire department, local and state police, utilities, insurance carriers, and community service organizations
vii. Meet with your insurance carriers to review all policies
b. Conduct a vulnerability analysis
i. List potential emergencies
ii. Estimate the probability of each emergency’s occurrence
iii. Analyze the potential human impact of each emergency – the possibility of death or injury
iv. Assess the potential property impact, including cost to replace, cost to set up temporary replacement, and cost to repair
v. Assess the potential business impact, or the potential loss of market share, including business interruption, employees unable to report to work, customer unable to reach facility, and interruption of product distribution
vi. Assess internal and external resources and your ability to respond
3. Develop the plan
a. Your plan should include the following components
i. An executive summary that gives a brief overview of the purpose of the plan, the facility’s emergency management policy, authorities and responsibilities of key personnel, the types of emergencies that could occur, and where response operations will be managed
ii. Briefly describe the plan’s approach to the core elements of emergency management
iii. Spell out how the company will respond to emergencies
iv. Include documents that could be included in an emergency, like call lists, maps, etc.
b. The development process
i. Identify challenges and prioritize activities
ii. Write the plan
iii. Establish a training schedule
iv. Meet periodically with local government agencies and community organizations
v. Review the plan, conduct training, and revise the plan as necessary
vi. Get final approval from senior management
vii. Distribute the plan to key personnel
4. Implement the plan
a. Integrate the plan into company operations – test how completely the plan has been integrated
b. Conduct training – training activities can include:
i. Orientation and education sessions
ii. Tabletop exercises
iii. Walk-through drill
iv. Functional drills
v. Evacuation drill
vi. Full-scale exercise
c. Evaluate and modify the plan – conduct a formal audit of the plan at least once a year
Small business owners are some of the busiest people in America, so it’s easy to just look at the most pressing, immediate business concerns. But as natural and man-made disasters seem to be happening with increased regularity, it seems it’s just a matter of time before a disaster comes knocking on your door. FEMA publishes a guide to help businesses prepare for emergencies. For a copy of the full guide, visit http://www.fema.gov/pdf/business/guide/bizindst.pdf. Below is a summary of their approach.
There are four steps in the planning process:
1. Establish a planning team
a. Form the team – the size of the team will depend on the needs, size, and resources of your company
b. Establish authority – demonstrate owner’s commitment and promote an atmosphere of cooperation by giving the planning team authority to take the necessary steps to implement an emergency plan
c. Issue a mission statement – your statement should define the purpose of the plan, indicate it will involve the whole organization, and define the authority and structure of the planning group
d. Establish a schedule and budget – establish a work schedule, planning deadlines, and an initial budget
2. Analyze capabilities and hazards
a. Where do you stand right now?
i. Review internal plans and policies
ii. Meet with outside groups, such as a community emergency management office, the fire or police department, and telephone and utility companies
iii. Identify codes and regulations, such as occupational safety and health regulations, environmental regulations, fire codes, seismic safety codes, and zoning regulations
iv. Identify critical products, services, and operations to assess the impact of potential emergencies and to determine the need for backup systems
v. Identify internal resources and capabilities that could be needed in an emergency, including personnel, equipment, facilities, and backup systems
vi. Identify external resources that could be needed in an emergency, such as the fire department, local and state police, utilities, insurance carriers, and community service organizations
vii. Meet with your insurance carriers to review all policies
b. Conduct a vulnerability analysis
i. List potential emergencies
ii. Estimate the probability of each emergency’s occurrence
iii. Analyze the potential human impact of each emergency – the possibility of death or injury
iv. Assess the potential property impact, including cost to replace, cost to set up temporary replacement, and cost to repair
v. Assess the potential business impact, or the potential loss of market share, including business interruption, employees unable to report to work, customer unable to reach facility, and interruption of product distribution
vi. Assess internal and external resources and your ability to respond
3. Develop the plan
a. Your plan should include the following components
i. An executive summary that gives a brief overview of the purpose of the plan, the facility’s emergency management policy, authorities and responsibilities of key personnel, the types of emergencies that could occur, and where response operations will be managed
ii. Briefly describe the plan’s approach to the core elements of emergency management
iii. Spell out how the company will respond to emergencies
iv. Include documents that could be included in an emergency, like call lists, maps, etc.
b. The development process
i. Identify challenges and prioritize activities
ii. Write the plan
iii. Establish a training schedule
iv. Meet periodically with local government agencies and community organizations
v. Review the plan, conduct training, and revise the plan as necessary
vi. Get final approval from senior management
vii. Distribute the plan to key personnel
4. Implement the plan
a. Integrate the plan into company operations – test how completely the plan has been integrated
b. Conduct training – training activities can include:
i. Orientation and education sessions
ii. Tabletop exercises
iii. Walk-through drill
iv. Functional drills
v. Evacuation drill
vi. Full-scale exercise
c. Evaluate and modify the plan – conduct a formal audit of the plan at least once a year
Wednesday, September 21, 2011
Jeff Lovelady's letter published in Transport Topics
These Letters to the Editor appear in the Sept. 19 print edition of Transport Topics. Click here to subscribe today.
EOBR Rule
This is in reference to the editorial “Fixing the EOBR Rule” (9-5, p. 4).
What we need to fix the electronic onboard recorder rule — and many other inane decisions by activist jurists — is a little real-world common sense.
Obviously, the plaintiffs went venue shopping and selected the 7th U.S. Circuit Court of Appeals for a reason. Why would you file there instead of Washington, where the Federal Motor Carrier Safety Administration and Congress reside and the rule originated?
Who defended this suit anyway? Of all the reasons to attack it they chose “harassment,” and the defense attorneys couldn’t refute it?
How is a device that accurately records a drivers’ hours more likely to be used to harass them than the current system, which we all know is manipulated daily by drivers themselves in order to maximize driving hours, miles and pay?
How is it that a lawyer couldn’t make that case to a panel of learned jurists? Harassment? That’s the best they could come up with? Harassment?
Surely the world has gone completely mad. Inept lawyers or idiot jurists — we are doomed. Common sense has left the building.
Kevin Mullen
Director, Safety
ADS Logistics Co. LLC
Area Transportation
Chesterton Ind.
Like/Kind Convoy
I was reading the Opinion column in the Sept. 5 issue of TT (“The 1031-LKE Cash-Flow Convoy,” p. 5) and noted that the cash savings on the taxes does not work in 2011 because you can take advantage of the 100% bonus depreciation and, in doing so, the net reduction in the taxable income for a Like/Kind Exchange Program transaction is the same as it would be if you did not elect to use the LKE method.
I thought it would be a good idea to point this out to your readers, especially if they are thinking that they are going to get some extra cash by taking advantage of a 1031 exchange. It would actually cost them money to do the LKE as the 1031 exchange agents charge a fee for this transaction.
Check us out on our website, so you know I am not some nut who does not know what he is talking about.
We have had this question asked and have done some tax projections, etc., to come to this conclusion. Also, our firm has a niche in working with trucking companies.
Assume that you buy 100 trucks as you would in an LKE, and assume they are still $100,000 each — so your basis is $10 million again. Your deduction without an LKE is $10 million, and you claim the $2.5 million as gain on sale of assets. With the LKE you have to reduce your basis in the new assets by the $2.5 million so you only take the 100% bonus on the $7.5 million.
As you can see, the net reduction in taxable income in either the LKE or straight sale is the same — $7.5 million — so there are no tax savings on the transaction.
This only works in 2011. Who knows what is going to happen for 2012?
I enjoy reading your magazine. Thank you for your commitment to the trucking industry.
Jeff Lovelady, CPA
Principal
Bell and Co.
North Little Rock, Ark.
Editor’s Note: We offered the authors of the Sept. 5 Opinion column a chance to respond to the letter above. Their response follows:
The previous commenter makes some important points regarding 100% bonus depreciation and its known applicability for the year 2011. However, as a Qualified Intermediary, we have been diligent in approaching the marketplace to offer solutions for this year and beyond.
LKE strategies are typically long term, reaching out many years into the future. Currently, at the federal level, 100% bonus has proven to offset recognized gains in a way that reduces/eliminates federal tax burdens, but a high number of states have effectively “decoupled” from federal bonus treatment, making the state tax impact a significant one. Additional considerations (for 2011), beyond decoupling, include:
• State net operating loss considerations.
• Federal Alternative Minimum Tax considerations for individual owners of S-corporations and partnerships.
• Ability to utilize used property as replacement property to maximize LKE and bonus benefit.
• Bonus depreciation sunset planning opportunities.
• Utilizing LKE service providers for fixed asset tax compliance and reporting.
• Time and resources needed to “de-institutionalize” a company’s LKE processes.
As you can see, there’s no easy answer and any current research efforts require a comprehensive analysis of all the relevant issues. And, planning around a nearly 100-year-old piece of tax law requires a constant eye on the future. So, for 2012 and beyond, serious tax planning should begin immediately, and LKEs should be part of that analysis. I believe the previous commentary put it best: “Who knows what is going to happen for 2012?”
Stephen Doherty
Director of National Accounts
Accruit LLC
Denver
EOBR Rule
This is in reference to the editorial “Fixing the EOBR Rule” (9-5, p. 4).
What we need to fix the electronic onboard recorder rule — and many other inane decisions by activist jurists — is a little real-world common sense.
Obviously, the plaintiffs went venue shopping and selected the 7th U.S. Circuit Court of Appeals for a reason. Why would you file there instead of Washington, where the Federal Motor Carrier Safety Administration and Congress reside and the rule originated?
Who defended this suit anyway? Of all the reasons to attack it they chose “harassment,” and the defense attorneys couldn’t refute it?
How is a device that accurately records a drivers’ hours more likely to be used to harass them than the current system, which we all know is manipulated daily by drivers themselves in order to maximize driving hours, miles and pay?
How is it that a lawyer couldn’t make that case to a panel of learned jurists? Harassment? That’s the best they could come up with? Harassment?
Surely the world has gone completely mad. Inept lawyers or idiot jurists — we are doomed. Common sense has left the building.
Kevin Mullen
Director, Safety
ADS Logistics Co. LLC
Area Transportation
Chesterton Ind.
Like/Kind Convoy
I was reading the Opinion column in the Sept. 5 issue of TT (“The 1031-LKE Cash-Flow Convoy,” p. 5) and noted that the cash savings on the taxes does not work in 2011 because you can take advantage of the 100% bonus depreciation and, in doing so, the net reduction in the taxable income for a Like/Kind Exchange Program transaction is the same as it would be if you did not elect to use the LKE method.
I thought it would be a good idea to point this out to your readers, especially if they are thinking that they are going to get some extra cash by taking advantage of a 1031 exchange. It would actually cost them money to do the LKE as the 1031 exchange agents charge a fee for this transaction.
Check us out on our website, so you know I am not some nut who does not know what he is talking about.
We have had this question asked and have done some tax projections, etc., to come to this conclusion. Also, our firm has a niche in working with trucking companies.
Assume that you buy 100 trucks as you would in an LKE, and assume they are still $100,000 each — so your basis is $10 million again. Your deduction without an LKE is $10 million, and you claim the $2.5 million as gain on sale of assets. With the LKE you have to reduce your basis in the new assets by the $2.5 million so you only take the 100% bonus on the $7.5 million.
As you can see, the net reduction in taxable income in either the LKE or straight sale is the same — $7.5 million — so there are no tax savings on the transaction.
This only works in 2011. Who knows what is going to happen for 2012?
I enjoy reading your magazine. Thank you for your commitment to the trucking industry.
Jeff Lovelady, CPA
Principal
Bell and Co.
North Little Rock, Ark.
Editor’s Note: We offered the authors of the Sept. 5 Opinion column a chance to respond to the letter above. Their response follows:
The previous commenter makes some important points regarding 100% bonus depreciation and its known applicability for the year 2011. However, as a Qualified Intermediary, we have been diligent in approaching the marketplace to offer solutions for this year and beyond.
LKE strategies are typically long term, reaching out many years into the future. Currently, at the federal level, 100% bonus has proven to offset recognized gains in a way that reduces/eliminates federal tax burdens, but a high number of states have effectively “decoupled” from federal bonus treatment, making the state tax impact a significant one. Additional considerations (for 2011), beyond decoupling, include:
• State net operating loss considerations.
• Federal Alternative Minimum Tax considerations for individual owners of S-corporations and partnerships.
• Ability to utilize used property as replacement property to maximize LKE and bonus benefit.
• Bonus depreciation sunset planning opportunities.
• Utilizing LKE service providers for fixed asset tax compliance and reporting.
• Time and resources needed to “de-institutionalize” a company’s LKE processes.
As you can see, there’s no easy answer and any current research efforts require a comprehensive analysis of all the relevant issues. And, planning around a nearly 100-year-old piece of tax law requires a constant eye on the future. So, for 2012 and beyond, serious tax planning should begin immediately, and LKEs should be part of that analysis. I believe the previous commentary put it best: “Who knows what is going to happen for 2012?”
Stephen Doherty
Director of National Accounts
Accruit LLC
Denver
Thursday, September 08, 2011
Recent Article about Bell and Company
We were featured in the August 2011 - The TABloid by TAB Bank as a Vendor Spotlight wanted to share with everyone.
VENDOR SPOTLIGHT // August
Bell & Company
Certified Public Accountants and Business Advisors
Bell & Company is a diversified public accounting and business advisory firm located in North Little Rock, AR that serves a broad range of corporate clients including a sub-specialty in the transportation sector. Since the company began in 1982, they have worked diligently to build expertise in many segments of the accounting field. They provide a wide spectrum of accounting services for small and medium-sized businesses — from cash flow budgeting to counseling on the sale or purchase of a business.
Small and medium-sized business owners and financial officers often face a common challenge — limited access to expert oversight and advice from accounting and finance professionals who focus on and specialize in serving privately-held businesses. As a privately-held, family-owned business, Bell & Company is strongly committed to serving similar businesses.
Their experience in understanding and serving privately-held, family-owned businesses is deeply-rooted. Bell & Company takes great pride in possessing intricate knowledge of the specific issues these businesses face on a daily basis. They know that their success is determined by their client’s success. Therefore, they strive constantly to help their clients improve in operations, accounting and finance, revenue and profitability, decision-making, and efficiency.
Their current clients include businesses and organizations in a wide variety of industries (e.g., transportation, professional, manufacturing, wholesale, and not-for-profits) and ranging in size from $1 million to $250 million in revenue. Their clients know they can count on the team at Bell & Company to provide them with the most proactive, relevant advice that can increase the gross profits of their companies while helping them manage their tax liabilities.
To learn more about Bell & Company, visit www.bellandcompany.net, or call Jeff Lovelady, CPA or Brady Pipkin, CPA at 501-753-9700. //
VENDOR SPOTLIGHT // August
Bell & Company
Certified Public Accountants and Business Advisors
Bell & Company is a diversified public accounting and business advisory firm located in North Little Rock, AR that serves a broad range of corporate clients including a sub-specialty in the transportation sector. Since the company began in 1982, they have worked diligently to build expertise in many segments of the accounting field. They provide a wide spectrum of accounting services for small and medium-sized businesses — from cash flow budgeting to counseling on the sale or purchase of a business.
Small and medium-sized business owners and financial officers often face a common challenge — limited access to expert oversight and advice from accounting and finance professionals who focus on and specialize in serving privately-held businesses. As a privately-held, family-owned business, Bell & Company is strongly committed to serving similar businesses.
Their experience in understanding and serving privately-held, family-owned businesses is deeply-rooted. Bell & Company takes great pride in possessing intricate knowledge of the specific issues these businesses face on a daily basis. They know that their success is determined by their client’s success. Therefore, they strive constantly to help their clients improve in operations, accounting and finance, revenue and profitability, decision-making, and efficiency.
Their current clients include businesses and organizations in a wide variety of industries (e.g., transportation, professional, manufacturing, wholesale, and not-for-profits) and ranging in size from $1 million to $250 million in revenue. Their clients know they can count on the team at Bell & Company to provide them with the most proactive, relevant advice that can increase the gross profits of their companies while helping them manage their tax liabilities.
To learn more about Bell & Company, visit www.bellandcompany.net, or call Jeff Lovelady, CPA or Brady Pipkin, CPA at 501-753-9700. //
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