TAX+BUSINESS ALERT
News for your business and your life. | Hawkins Ash CPAs
In this Edition
April 21, 2020

Seniors: Medicare Premiums Could Lower Your Tax Bill

PODCAST: What is the Economic Impact Payment?

Protect Your Estate with these Two Essential Documents

Reviewing Business Meal Expenses Under Today’s Tax Rules
Seniors: Medicare Premiums Could Lower Your Tax Bill
Americans who are 65 and older qualify for basic Medicare insurance, but they may need to pay additional premiums to get the level of coverage they desire. The premiums can be expensive—especially if you’re married and both you and your spouse are paying them. One aspect of paying premiums might be a positive, however: If you’re eligible, they may help lower your tax bill.

Premium Tax Deductions
Premiums for Medicare health insurance can be combined with other qualifying health care expenses for purposes of possibly claiming an itemized deduction for medical expenses on your individual tax return. This includes amounts for “Medigap” insurance and Medicare Advantage plans.

Some people buy Medigap policies because Medicare Parts A and B don’t cover all their health care expenses. Coverage gaps include co-payments, co-insurance, deductibles and other costs. Medigap is private supplemental insurance that’s intended to cover some or all gaps.

Fewer Itemizers
Qualifying for a medical expense deduction can be difficult for a couple of reasons. For 2019, you can deduct medical expenses only if you itemize deductions and only to the extent that total qualifying expenses exceeded 7.5 percent of AGI.

The Tax Cuts and Jobs Act nearly doubled the standard deduction amounts for 2018 through 2025. For the 2019 tax year, the standard deduction amounts are $12,200 for single filers, $24,400 for married joint-filing couples and $18,350 for heads of households. So, fewer individuals are claiming itemized deductions. However, if you have significant medical expenses (including Medicare health insurance premiums), you may be able to itemize and collect some tax savings.

Important note: Self-employed people and shareholder-employees of S corporations can generally claim an above-the-line deduction for their health insurance premiums, including Medicare premiums. That means they don’t need to itemize to get the tax savings from their premiums.

Other Deductible Medical Expenses
In addition to Medicare premiums, you can deduct a variety of medical expenses, including those for ambulance services, dental treatment, dentures, eyeglasses and contacts, hospital services, lab tests, qualified long-term care services, prescription medicines, and others.

Keep in mind that many items that Medicare doesn’t cover can be written off for tax purposes, if you qualify. You can also deduct transportation expenses to get to medical appointments. If you go by car, you can deduct a flat 20-cents-per-mile rate for 2019.

More Information
Health care costs are on the minds of most people right now in light of the coronavirus (COVID-19) outbreak. Contact us with any questions about recently passed tax relief, Medicare coverage options or claiming medical expense deductions on your personal tax return.

Contact: Kelly Oliver, EA
Direct: 608.793.3118
Email: koliver@hawkinsashcpas.com
PODCAST:
What is the Economic Impact Payment?
Find out more about the new Economic Impact Payment in this podcast overview: Who is and is not eligible to receive it, how much you might be able to expect to receive and when. 
Protect Your Estate with these Two Essential Documents
Estate planning isn’t just about what happens to your assets after you die. It’s also about protecting yourself and your loved ones. To ensure that your wishes are carried out, and that your family is spared the burden of guessing—or arguing over—what you would decide, put those wishes in writing. Generally, that means executing two documents:

1. A Living Will
This document expresses your preferences for the use of life-sustaining medical procedures, such as artificial feeding and breathing, surgery, invasive diagnostic tests, and pain medication. It also specifies the situations in which these procedures should be used or withheld.

Living wills often contain a “do not resuscitate” order, often referred to as a “DNR,” which instructs medical personnel not to perform CPR in the event of cardiac arrest.

2. A Health Care Power of Attorney (HCPA)
This document authorizes a surrogate—your spouse, child or another trusted representative—to make medical decisions or consent to medical treatment on your behalf if you’re unable to do so. It’s broader than a living will, which generally is limited to end-of-life situations, though there may be some overlap.

An HCPA might authorize your surrogate to make medical decisions that don’t conflict with your living will, including consenting to medical treatment, placing you in a nursing home or other facility, or even implementing or discontinuing life-prolonging measures.

It’s a good idea to have both a living will and an HCPA or, if allowed by state law, a single document that combines the two. Contact us if you have questions regarding either one or about any other aspect of the estate planning process.
Reviewing Business Meal Expenses Under Today’s Tax Rules
As the world battles coronavirus (COVID-19), companies aren’t doing much “wining and dining” of customers, prospects, vendors or employees. But someday you will again. With a hopeful eye on the future, let’s review the rules for deducting business meal expenses under the Tax Cuts and Jobs Act (TCJA).

Three Basic Rules
Among the biggest changes is that you can no longer deduct most business-related entertainment expenses. The TCJA disallows deductions for entertainment expenses, including those for sports events, theater productions, golf outings and fishing trips.

You can still deduct 50 percent of the cost of food and beverages for most meals conducted with business associates. However, you need to follow three basic rules in order to prove that your meal expenses are business related:

  1. The expenses must be “ordinary and necessary.” This means your food and beverage costs are customary and appropriate. They shouldn’t be lavish or extravagant.
  2. The expenses must be directly related or associated with your business. This means that you expect to receive a concrete business benefit from them. The principal purpose for the meal must be business. You can’t go out with a group of friends for the evening, discuss business with one of them for a few minutes, and then write off the check.
  3. You must be able to substantiate the expenses. There are requirements for proving that meal and beverage expenses qualify for a deduction. You must be able to establish the amount spent, the date and place where the meals took place, the business purpose, and the business relationship of the people involved.

Set up detailed recordkeeping procedures to keep track of business meal costs. That way, you can prove them and the business connection in the event of an IRS audit.

Other Considerations
What if you spend money on food and beverages at an entertainment event? The IRS clarified in guidance (Notice 2018-76) that taxpayers can still deduct 50 percent of food and drink expenses incurred at entertainment events, but only if business was conducted during the event or shortly before or after. The food-and-drink expenses should also be “stated separately from the cost of the entertainment on one or more bills, invoices or receipts,” according to the guidance.

Another related tax law change involves meals provided to employees on the business premises. Before the TCJA, these meals provided to an employee for the convenience of the employer were 100 percent deductible by the employer. Beginning in 2018, meals provided for the convenience of an employer in an on-premises cafeteria or elsewhere on the business property are only 50 percent deductible. After 2025, these meals won’t be deductible at all.

More Complicated
The treatment of meal and entertainment expenses has become more complicated under the TCJA. We can keep you up to speed on the issues and suggest strategies to save taxes on your business meal bucks; just contact us.
More Resources from CPA-HQ
Families First Coronavirus Response Act (FFCRA) Notice

Each covered employer must post a notice of the FFCRA requirements in a conspicuous place on its premises. Download poster and learn more on our website.

Sending Documents and Information to Us? Read this first.

This newsletter provides an overview of the benefits of using our secure online portal, as well as contact information for a Hawkins Ash representative in each office who can assist you.

QuickBooks Connect: Payroll in QuickBooks Desktop

Sign up to join us for this virtual event on May 14! Advanced Certified QuickBooks Desktop ProAdvisor Debbie Denny will show you how to perform certain payroll tasks in QuickBooks Desktop.
Part of your business. Part of your life. | www.HawkinsAshCPAs.com