Tax Time

[orlandoguy]

It has been discussed here before about the savings you can recieve with a doctor or chiropractor's presciption for a spa.  You can save on sales tax and possibly deduct the cost of the spa if certain things apply.

Going over my itemized deductions with my accountant, she informed me that I can deduct the cost of running the spa as well as all chemicals for the year.  This added up to a nice deduction.  Hope this might help someone.

[Spatech_tuo]

Going over my itemized deductions with my accountant, she informed me that I can deduct the cost of running the spa as well as all chemicals for the year.  This added up to a nice deduction.  Hope this might help someone.

It seems to me that some of the deductions people take are based on the subjectivity of the accountants interpreting the tax laws.  I just hope that the IRS agrees with her.

My good buddy is a long time tax guy and does mine yearly (for free or let's just say no $$ but I always "owe" him and find out at some point in the year in what way) and he's always saying things like "ya know, I think we can say this and get away with it" or "this will fly under the radar if we do it this way and only for this much...". It's certainly not black and white.

[Dr. Spa™ Ret.]

Good luck!  

While some accountants can get a bit liberal interpreting the tax law, I can assure you if you get audited, the IRS has their OWN interpretations.

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Reprinted from HURT9111.org
posting date unknown

Is Your Hot Tub Tax Deductible?
Will the IRS or Insurance Company pay for Your Hot Tub?
Can You Get a Tax Deduction for Your Hot Tub?:

The IRS stated in its opinion letter Index No.: 213.05-00, " Section 213(a) allows as a [tax] deduction the expenses paid during the taxable year for medical care of the taxpayer, spouse, or dependent. Under § 213(d)(1)(A), an expense is for 'medical care' if its primary purpose is the diagnosis, cure, mitigation, treatment, or prevention of disease.   Notice the words "primary purpose".  Because a hot tub is of a particularly personal nature, you must establish that your hot tub is "primarily" for the cure, mitigation, treatment, or prevention of disease before you can deduct the cost of your hot tub on your tax return.  You may be able to claim your hot tub as a tax deduction even though you also derive pleasure from it and even though someone else such as your spouse may use it, as long as you are buying the hot tub primarily to relieve pain due to an injury or disease.  

How do you prove to the IRS that your hot tub was purchased primarily to relieve pain?

Of course, you may not have to prove anything if you are not audited, however, you should prepare in case you are.  This is accomplished by medical records which prove that you have an injury and/or arthritis and a prescription from your doctor prescribing a hot tub for the purpose of alleviating or treating your injury or arthritis.  Ideally, you should request a written report from your treating physician which summarizes your condition (diagnoses); attaches copies of medical records showing objective findings such as X-Ray, MRI and EMG reports; states that the physician believes a hot tub would be of therapeutic value; why the hot tub is of benefit to you and your prognosis with or without using a hot tub (what the physician hopes the hot tub will accomplish).

The IRS may look at other objective factors that indicate your motive for purchasing the hot tub.

For instance, a very large hot tub built into a very expensive beautiful deck may indicate an ulterior motive, therefore, with such a hot tub, it would be advisable to have substantial medical documentation and deduct an amount less than the total purchase price.  Since the difference in price between a large hot tub and a small hot tub is usually small, you should be able to deduct most of the cost of your hot tub.  For instance, if a small four person hot tub costs $8,000 and you purchase a large seven person hot tub for $9,500, I would deduct only $8,000.

Can you deduct the cost of a hot tub when you have been reimbursed by an insurance company for the cost?

No. You should note that if you obtain payment from an insurance company to purchase your hot tub, you cannot also deduct the cost of the hot tub on your tax return.  If you deduct the cost of your hot tub on your tax return and later obtain reimbursement from an insurance company, you would then have to declare that reimbursement as income on your next year's tax return.

Can you claim your hot tub as a tax deduction when you suffered a short-term injury?

My belief is probably no.  Where a disease such as arthritis is concerned, this will pose less of a problem because of the long-term nature of the disease. However, with an injury, I believe the IRS would disallow a tax deduction where the taxpayer sustained a simple sprain, unless the taxpayer also happens to be a professional athlete or can document that use of the hot tub was necessary to reduce loss of income.  Where an injury becomes a long-term problem, such as when traumatic arthritis develops, I believe that a claim to deduct a hot tub should be allowed.  The long-term nature of some injuries and medical problems are more obvious, such as when a taxpayer undergo surgery.  You should discuss this issue with your accountant and your doctor to make sure that both are in agreement as to the length of time required for a disability and as to whether your medical condition meets that requirement.

How much will a tax deduction for a hot tub save me?

You will have to discuss this with your accountant.  In fact, you should discuss everything mentioned here with your accountant prior to deducting the expense of your hot tub on your tax return. The information here is not tax advice and although I am a lawyer and took 17 credits of tax in law school, that was a long time ago, I am not an accountant and you should not rely on the information here.  

[Brewman]

It has been discussed here before about the savings you can recieve with a doctor or chiropractor's presciption for a spa.  You can save on sales tax and possibly deduct the cost of the spa if certain things apply.

Going over my itemized deductions with my accountant, she informed me that I can deduct the cost of running the spa as well as all chemicals for the year.  This added up to a nice deduction.  Hope this might help someone.

Was this a federal deduction under the medical?
If so, how the heck did you get over the hurdle?
Do you have a lot of other unreimbursed medical expenses?

[orlandoguy]

Considering my accountant was an auditor for the IRS for 18 years, I trust her a lot regarding red flags.

The way I understand it, you need to hit a certain threshold of expenses medically before you can start deducting.  I believe it to be 6 grand?  With the birth of my child earlier this year and all the doctor visits that the insurance paid partially, this was easy.  It was a good year to buy a hot tub in this regard.

I am not an accountant, but I did stay at a Holiday Inn Express, and thanks for all the good luck wishes.

[Brewman]

The threshold on medical deductions is a percentage of your adjusted gross income.  It's either 10% or 15%, I don't recall which.  
In my case, the premiums I pay for health insurance are my biggest expense, and they are done pre tax, so I can't again deduct them, so all we've got left is a few thousand per year we pay in copays and stuff.  
Now that you quailify, make sure you get all you are entitled to.  But I bet your accountant already covered that with you.  

[J._McD]

It seems to me that some of the deductions people take are based on the subjectivity of the accountants interpreting the tax laws.  I just hope that the IRS agrees with her....................and he's always saying things like "ya know, I think we can say this and get away with it" or "this will fly under the radar if we do it this way and only for this much...". It's certainly not black and white.

It is all about the games we play.  But, it still comes down to waving a red flag in front of a raging bull.  I guess, if one can weather the storm of an IRS audit, red flags are not really the important issue.  After all, not only do we all pay taxes, but we're impecably honest about how we calculate them, from the way we see it.

However, I think they base their audits on the way they see it, and then we argue about the difference before we come to an agreement and settle.

If (determined by the IRS) it is a legitimate medical expense, all cost associated with the medical expense, electrical, chemical, service calls, etc. "qualify" (again determined by the IRS) as a deduction under the terms and conditions set forth by the IRS.  

This of course is subject to their interpretation, but as long as your accountant will accompany you and be responsible for any differences, I can see how you would be comfortable with the write off attracting the scrutiny of the IRS's attention and any question it would raise in their mind.  

As long as one would have a long history of such related medical expenses in past history, it should meet the acid test of the audit.

[orlandoguy]

I think you hit on a key point.  History.  If you are constantly claiming huge deductions, you are gonna get flagged.  I personally see a doctor once every few years, but with a baby I live at the doctors office.

I also believe the IRS has been defanged to a great extent and the big earners in certain professions are scrutinized much more frequently.

I also give bags of used clothes to the missing children charity and they hand me a blank sheet to itemize the estiamted value.  I am of course honest, but learned a few tricks.

This isn't the right forum to go into my theories about how poorly the government uses our tax dollars, so I will bow out of this thread with thanks that I will be writing off my chemicals with hopes that a reciept request and audit aren't in my near future.

[Brewman]

The IRS has several methods of selecting returns to review.  There is a random process where they just claim to spot check so many returns per thousand.
Then there are the risk areas like taking a home office deduction- those might have a somewhat higher chance of an audit.  Or unusually high deductions for medical, charity, etc...
They are essentially a collection agency.  The more they collect the happier thay are.  So they go after the returns that have the highest potential payback.
It doesn't really pay for them to spend hours picking thru a return when there isn't much potential tax to collect.  

Taking what you believe is a legitimate deduction isn't a crime.  Worst case is that they dis-allow, and make you file an ammended return.  But if it results in more taxes due, you might have to pay penalties and interest on the unpaid portion.  Most letigimate tax preparers will pay the interest and penalties if it was their error.

[orlandoguy]

I agree with what you say Brewman.  I have also been told that once you get audited, you will be more likely to be audited again.

I wouldn't think my preparer would pay any penalties though.  She goes off the info I have given her and makes suggestions as to things I might have overlooked.

I have a lot of friends that use the programs like "Turbo Tax", but feel that if you are itmemizing at all, a human preparer is the best way to go.

[Brewman]

I've been using blocks online software for the past few years- last year I was even able to file both returns, state and federal, for no charge.  That included use of their software, and e-filing.  This year they tightened up the rules back to income, so I can't go free.
But I do itemize, and have never had a return questioned.  But I'm pretty savvy on the tax thing so I feel really comfortable preparing my own.
Which I'll have to start doing soon.

[Brookenstein]

We've been audited once by the state of OR.  We were completely in the right, but it became such a hastle trying to fight it that after a year and losing our initial appeal we just paid it.  No fees, nothing.  We thought we should have gotten ~$600 back, they made us pay $400.  Since we lost the written appeal we would have had to go to court and prove our case and it wasn't worth travelling 1000 miles.  BTW, the issue was because DH worked in OR 1/2 the year and in CA 1/2 the year... OR made him pay OR taxes on the CA wages that we also paid CA taxes on.

I'm scared we will get audited by the Feds this year as our deductions for mortgage interest is over 40% our income.  I know that has to look suspicious, but its all on the up and up.  Its amazing the things that happen with outrageous housing prices and  stated income loans.  

I'm not even touching questionable deductions this year, lol.

[Spatech_tuo]

I'm scared we will get audited by the Feds this year as our deductions for mortgage interest is over 40% our income.  I know that has to look suspicious,

Unfortunately that really doesn't look very suspicious nowadays, especially with you being in Cali.

[whitmfi]

Just to clear up a few things... whatever exceeds 7.5% if your AGI in medical is what you can deduct.  As far as relying on someone that has previously worked for the IRS as a tax prep resource... hmmm... sorry, I do taxes for more retired and ex IRS employees than you could EVEN believe and they all admit that they do not have any idea how to prepare a complete return, they may know how to check and audit sections but as far as an entire return.. they don't know how, and we are in a huge IRS hub being that one of their biggest offices is in downtown Cincinnati, and I've been an accountant and tax preparer for over 10 years now.