Tax Short Subjects, 7/19/18

Legislative Update, Tax Deductions, Fraud Update


Legislative Report

On July 11, the U.S. House Ways and Means Committee approved a series of health care related bills. Included are provisions affecting Health Savings Accounts (HSAs) and rollbacks of some Affordable Care Act provisions. Among the changes are an increase in the HSA contribution limit and a provision to allow certain over-the-counter products to qualify as medical expenses. Other proposals would delay implementing the excise tax on high cost employer health coverage; put a temporary moratorium on the employer mandate; and allow fitness costs as medical expenses.


Business owners can generally deduct ordinary and necessary expenses, if they can prove the costs are bona fide and business related. In one case, a married couple were officers in a mortgage business. The U.S. Tax Court ruled they were eligible to deduct the cost of a promotional mailer as an advertising expense. As proof, they used the husband’s credible testimony and a copy of the original invoice, and showed a bank debit for the same amount. Other deductions, however, such as office rent and furniture, were limited, due to lack of proof. (TC Memo 2018-102)

Fraud Report

A taxpayer’s former associates in a medical practice, who were angry with him, filed a fraudulent information return (Form 1099-MISC). They reported that his taxable income was more than $159,000, rather than the approximately $38,000 that he argued should have been reported. A jury agreed with him that a fraudulent return was filed. He sought compensatory damages to cover his many years of legal and other related expenses. A U.S. District Court awarded him nearly $179,000 in damages. (Angelopoulo v. Keystone Orthopedic Specialists, DC IL, 7/9/18)



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