What happens if illness, injury or age-related dementia renders you unable to make decisions or communicate your wishes regarding your health care or financial affairs? Unless your estate plan addresses these situations, your family may be forced to seek a court-appointed guardian. Health care arrangements are particularly important because your wishes won’t necessarily coincide with someone else’s judgment about what’s “in your best interests.”

To help ensure that your wishes are carried out, create a health care power of attorney (HCPOA). Sometimes referred to as a “health care proxy” or “durable medical power of attorney,” an HCPOA appoints a representative to make medical decisions on your behalf if you’re unable to do so.

Choose a representative

Who should be your representative? The natural inclination may be to name your spouse or an adult child. This may be the right choice, but not always.

Consider whether the family member has a differing view on when to continue or terminate life-sustaining measures or would find it too difficult to make such decisions. Designate someone you trust to carry out your wishes.

Detail your health-care-related wishes

Your HCPOA should provide guidance on how to make health care decisions. Although it’s impossible to anticipate every potential scenario, the document can provide your representative with guiding principles.

For example: What are your desired health outcomes? Is your top priority to extend your life? Is artificial nutrition or hydration an option? Under what circumstances should life-sustaining treatment be withheld or terminated?

Additional documents

Another important document to have in place is a living will — which communicates your preferences regarding life-sustaining medical treatment in the event you are dying of a terminal condition or an end-stage condition. Also consider a revocable trust and durable power of attorney to provide for a trusted representative to manage your financial affairs in the event you’re unable to do so.

© 2020 Covenant CPA

Many businesses now offer, as part of their health care benefits, various types of accounts that reimburse employees for medical expenses on a tax-advantaged basis. These include health Flexible Spending Accounts (FSAs), Health Reimbursement Arrangement (HRAs) and Health Savings Account (HSAs, which are usually offered in conjunction with a high-deductible health plan).

For employees to get the full value out of such accounts, they need to educate themselves on what expenses are eligible for reimbursement by a health FSA or HRA, or for a tax-free distribution from an HSA. Although an employer shouldn’t provide tax advice to employees, you can give them a heads-up that the rules for reimbursements or distributions vary depending on the type of account.

Pub. 502

Unfortunately, no single publication provides an exhaustive list of official, government-approved expenses eligible for reimbursement by a health FSA or HRA, or for a tax-free distribution from an HSA. IRS Publication 502 — “Medical and Dental Expenses” (Pub. 502) comes the closest, but it should be used with caution.

Pub. 502 is written largely to help taxpayers determine what medical expenses can be deducted on their income tax returns; it’s not meant to address the tax-favored health care accounts in question. Although the rules for deductibility overlap in many respects with the rules governing health FSAs, HRAs and HSAs, there are some important differences. Thus, employees shouldn’t use Pub. 502 as the sole determinant for whether an expense is reimbursable by a health FSA or HRA, or eligible for tax-free distribution from an HSA.

Various factors

You might warn health care account participants that various factors affect whether and when a medical expense is reimbursable or a distribution allowable. These include:

Timing rules. Pub. 502 notes that expenses may be deducted only for the year in which they were paid, but it doesn’t explain the different timing rules for the tax-favored accounts. For example, a health FSA can reimburse an expense only for the year in which it was incurred, regardless of when it was paid.

Insurance restrictions. Taxpayers may deduct health insurance premiums on their tax returns if certain requirements are met. However, reimbursement of such premiums by health FSAs, HRAs and HSAs is subject to restrictions that vary according to the type of tax-favored account.

Over-the-counter (OTC) drug documentation. OTC drugs other than insulin aren’t tax-deductible, but they may be reimbursed by health FSAs, HRAs and HSAs if substantiation and other requirements are met.

Greater appreciation

The pandemic has put a renewed emphasis on the importance of employer-provided health care benefits. The federal government has even passed COVID-19-related relief measures for some tax-favored accounts.

As mentioned, the more that employees understand these benefits, the more they’ll be able to effectively use them — and the greater appreciation they’ll have of your business for providing them. Our firm can help you fully understand the tax implications, for both you and employees, of any type of health care benefit.

© 2020 Covenant CPA

Like the coronavirus (COVID-19) pathogen itself, incidents of COVID-19 fraud are surging and financial losses are piling up. The Federal Trade Commission (FTC) reports that the number of 2020 COVID-19-related complaints doubled in just one recent week. As of March 31, losses attributed to the outbreak stood at $5.9 million. Here are some of the scams criminals are perpetrating.

Bad medicine

Although travel and vacation company disputes top the FTC’s most recent list of COVID-19 complaints, most of these relate to cancellations and refunds, not fraud. Much more worrying for American consumers are the many online vendors hawking suspect treatments and tests. On March 9, the FTC sent warning letters to seven companies advertising everything from virus-fighting tea to essential oils. The Commission has informed companies that don’t immediately cease making such false claims that they face legal action.

For the record, the Food and Drug Administration hasn’t approved any vaccines, drugs or at-home tests as effective in the fight against the virus. Fortunately, it’s relatively easy to protect yourself from ineffective and potentially dangerous products. Simply ignore pitches that sound too good to be true.

If you want to get tested for COVID-19, visit the Centers for Disease Control and Prevention’s (CDC’s) website  at cdc.gov for information. Contact your healthcare provider directly if you’re experiencing symptoms of the disease.

Law enforcement on the case

The FBI and U.S. Attorney’s office are also closely tracking COVID-19 fraud. A recently assembled task force warns consumers and businesses about several novel scams, including:

App malware. Fraudsters are creating new — and hacking existing — mobile apps that supposedly provide COVID-19 data. In fact, the apps are infected with malware that gathers financial and personal information.

Healthcare provider scams. Some people have received calls from a “doctor” or “hospital” that claims it treated a family member and demands payment. Know that recent federal legislation makes most COVID-19 testing and treatment free.

Hot stocks. There’s nothing new about investment scams, but con artists are using the pandemic to promote dubious stocks. You might hear, for example, that a pharmaceutical company’s stock will soon go through the roof because it has a miracle drug in the pipeline. Bottom line: Check with a trusted advisor before investing your money.

Exercise skepticism

As always, exercise caution when answering the phone, opening email and reading texts. These days, scammers may claim to represent the CDC or another government agency to try to con you out of money or personal information. When in doubt, be skeptical. And if you believe you’ve fallen for a scam or are worried about protecting your assets or your business from fraud, contact us.

© 2020 Covenant CPA

Like many sectors of the economy, the healthcare industry regularly suffers data breaches. Healthcare analytics company Protenus has found that nearly 32 million patient records were breached between January and June 2019 alone.

Alarmed? You should be. However, there are steps you can take to reduce the risk that thieves will get a hold of your medical records and use them for nefarious purposes.

Why they’re valuable

Unlike other types of personal data, healthcare records command a hefty premium on the black market. That’s at least partly because criminals can potentially use information about an individual’s health to blackmail him or her.

Also, stolen medical records include valuable details about people’s identities. In fact, there’s usually enough information in medical files to facilitate extensive identity theft. These schemes can involve health insurance-related fraud as well as financial account and tax fraud schemes.

What you can do

The following four steps can help you protect your personal medical and other data:

  1. Be careful what you share with providers. Healthcare providers typically ask for a lot of personal information, including your Social Security number. But you aren’t obligated to provide it. If in doubt regarding whether a piece of data is critical to receiving care, ask your provider. If the provider says the information is necessary, learn how it plans to use the data —and protect it from thieves.
  2. Read the small print. Apply the same caution to healthcare apps. Only provide access to data that’s critical for the service. Read the service provider’s terms and conditions and its privacy notice so that you understand how and where your data might be used.
  3. Closely review insurance statements. Sometimes the first sign of identity theft is an insurance company statement detailing medical services you didn’t receive. Go over every insurance document and contact your insurer and the medical provider immediately if you spot any discrepancies.
  4. Don’t assume privacy online. Revealing personal details online (for example, with a large group of “friends” on social media) may provide criminals with enough information to steal your identity. Keep in mind that a dedicated criminal could piece together a detailed profile of you simply by visiting multiple sites where you’re active.

If your data is compromised

If you fear your healthcare information was included in a data breach or has otherwise been compromised, consider contacting the three major credit bureaus to freeze your credit file. This prevents the unauthorized creation of new accounts. Also step up your monitoring of insurance statements to ensure no one is filling prescriptions or making office visits in your name.

© 2019 Covenant CPA

Even if you haven’t heard much about it lately, know this: Health care fraud is alive and well in the United States. Here’s a roundup of recent stats, law enforcement initiatives, common fraud schemes and how you can help prevent these crimes.

Just the facts

During fiscal year (FY) 2018, the Health Care Fraud and Abuse Control Program (a government initiative that coordinates federal, state, and local law enforcement) won or negotiated over $2.3 billion in health care fraud judgments and settlements. During the same period, the Department of Justice (DOF) opened 1,139 new criminal health care fraud investigations. In addition, the DOJ filed charges in 572 criminal cases.

What does this mean for you? The National Health Care Anti-Fraud Association estimates that health care fraud costs the nation at least $68 billion annually.

Many players, many games

Health care fraud can be perpetrated in a variety of ways by many different players. For example, insurance companies may bilk government programs such as Medicare and Medicaid by submitting false documentation, mishandling claims, charging excessive rates or failing to pass along discounts.

Fraud by insured employees is another problem. Employee-initiated schemes include submitting fraudulent claims — often in collaboration with shady medical providers.

Dishonest providers, including doctors, nurses, chiropractors and pharmacists, are responsible for a large volume of health care fraud. They may bill for unnecessary or harmful medical procedures, bill for procedures never performed, “upcode” inexpensive procedures to expensive ones, or bill for brand names and dispense generics. Corrupt practitioners may recruit healthy individuals and bill their insurance companies for costly medical services that are never provided.

What you can do

Fraud thrives in high volume environments. So, the more health care transactions your business or organization processes, the greater the potential for fraud to slip through undetected, and the more vigilant you must be.

You can help combat these schemes by strictly complying with audit obligations. For instance, randomly sample products and services invoiced and compare them with what was actually delivered to the patients. Looking for discrepancies can net you stolen goods and even large-scale thefts. It also sends a message to potential perpetrators that you’re watching.

Role of internal controls

In addition to contractual audits, internal controls play an important role in preventing and uncovering health care fraud. Contact us if your organization needs help building a robust internal control system.

© 2019 Covenant CPA

The pace of health care cost inflation has remained moderate over the past year or so, and employers are trying to keep it that way. In response, many businesses aren’t seeking immediate cost-cutting measures or asking employees to shoulder more of the burden. Rather, they’re looking to “future-focused” health care plan features to encourage healthful behaviors.

This was a major finding of the 2018 National Survey of Employer-Sponsored Health Plans, an annual study issued by Mercer.

Virtual care

Among the future-focused strategies highlighted by the survey are telemedicine services. Also known as virtual care, the services streamline delivery of health care services by gathering medical data and offering interaction with health care professionals remotely via apps and the phone.

One of the promises of virtual care services is that patients will be more willing to seek medical attention when it can be delivered conveniently, and this inherent efficiency will lead to better health outcomes and reduced costs. But the study found that, though telemedicine services are widely offered, utilization rates remain low.

Specifically, the proportion of large employers (those with at least 500 employees) incorporating telemedicine into their health benefits — 80% — was up substantially from 71% in the previous year’s survey (2017) and just 18% in 2014. But utilization was only 8% of eligible employees in 2018, though that rate is up slightly from 7% the previous year.

Other trending enhancements

Here are some additional future-focused health plan design features and their prevalence among the 2,409 employers that participated in the survey:

  • Targeted support for people with chronic conditions, including diabetes and cancer: 56%.
  • Expert medical opinion services, which allow employees to get an assessment from a highly qualified specialist on a given medical issue: 51%.
  • “Enhanced care management” featuring medical personnel who provide support throughout the entire care episode and help resolve claim issues: 36%.
  • Access to “centers of excellence” for complex surgeries and other medical needs, including transplants (25%), bariatric care (14%) and oncology (10%).

These strategies “may take more time to reduce medical costs than greater employee cost-sharing, but in the process they change how plans manage care, how providers are reimbursed, and even how people behave,” according to the report.

Overall, promoting a “culture of health” was found to be a high priority for many employers. Typical tactics to achieve this goal include providing healthy food choices in cafeterias and meetings, banning smoking on the work campus, and building on-site fitness facilities. They also involve offering resources to support “financial health” and “a range of technology-based resources to engage employees in caring for their health and fitness.”

Improved experience

The design of your company’s health care plan can evolve over time to, as feasible, take advantage of features that will likely improve the experience for everyone. We can help you identify all costs associated with your plan and assess which plan design would best suit your business. 205-345-9898 and info@covenantcpa.com for more!

© 2019 CovenantCPA

It’s not just businesses that can deduct vehicle-related expenses. Individuals also can deduct them in certain circumstances. Unfortunately, the Tax Cuts and Jobs Act (TCJA) might reduce your deduction compared to what you claimed on your 2017 return.

For 2017, miles driven for business, moving, medical and charitable purposes were potentially deductible. For 2018 through 2025, business and moving miles are deductible only in much more limited circumstances. TCJA changes could also affect your tax benefit from medical and charitable miles.

Current limits vs. 2017

Before 2018, if you were an employee, you potentially could deduct business mileage not reimbursed by your employer as a miscellaneous itemized deduction. But the deduction was subject to a 2% of adjusted gross income (AGI) floor, which meant that mileage was deductible only to the extent that your total miscellaneous itemized deductions for the year exceeded 2% of your AGI. For 2018 through 2025, you can’t deduct the mileage regardless of your AGI. Why? The TCJA suspends miscellaneous itemized deductions subject to the 2% floor.

If you’re self-employed, business mileage is deducted from self-employment income. Therefore, it’s not subject to the 2% floor and is still deductible for 2018 through 2025, as long as it otherwise qualifies.

Miles driven for a work-related move in 2017 were generally deductible “above the line” (that is, itemizing isn’t required to claim the deduction). But for 2018 through 2025, under the TCJA, moving expenses are deductible only for certain military families.

Miles driven for health-care-related purposes are deductible as part of the medical expense itemized deduction. Under the TCJA, for 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of your AGI. For 2019, the floor returns to 10%, unless Congress extends the 7.5% floor.

The limits for deducting expenses for charitable miles driven haven’t changed, but keep in mind that it’s an itemized deduction. So, you can claim the deduction only if you itemize. For 2018 through 2025, the standard deduction has been nearly doubled. Depending on your total itemized deductions, you might be better off claiming the standard deduction, in which case you’ll get no tax benefit from your charitable miles (or from your medical miles, even if you exceed the AGI floor).

Differing mileage rates

Rather than keeping track of your actual vehicle expenses, you can use a standard mileage rate to compute your deductions. The rates vary depending on the purpose and the year:

  • Business: 54.5 cents (2018), 58 cents (2019)
  • Medical: 18 cents (2018), 20 cents (2019)
  • Moving: 18 cents (2018), 20 cents (2019)
  • Charitable: 14 cents (2018 and 2019)

In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls. There are also substantiation requirements, which include tracking miles driven.

Get help 

Do you have questions about deducting vehicle-related expenses? Contact us at 205-345-9898 or info@covenantcpa.com. We can help you with your 2018 return and 2019 tax planning.

© 2019 CovenantCPA