Author Topic: Ask FQA!  (Read 15580 times)

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Offline Ultimate Paragon

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Re: Ask FQA!
« Reply #90 on: January 05, 2016, 03:03:19 pm »
What exactly is the difference between a Social Democrat and a Democratic Socialist?

Offline Art Vandelay

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Re: Ask FQA!
« Reply #91 on: January 05, 2016, 03:25:07 pm »
One's more social whereas the other is more democratic.

Offline mellenORL

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Re: Ask FQA!
« Reply #92 on: January 05, 2016, 06:58:02 pm »
Democratic Socialism would be, say, China if they actually had an honest election and legislative system (which they assuredly do not). It's State Socialism with Democracy. Most industries are at least partly owned or heavily supervised by the state.

Social Democracy is more like what one sees in the Scandinavian countries, where most of the economy is comprised of a free but well regulated market and businesses. A few industry sectors are partly owned or heavily regulated by the state. They are accurately called welfare states, in that the people have entitled safety nets to be free from being uneducated, homeless, starving, or medically neglected, all supported by taxes.

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Offline Sleepy

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Re: Ask FQA!
« Reply #93 on: February 03, 2016, 01:09:55 pm »
Is anyone here good with US taxes? This is the dilemma I'm facing (copy-pasted from Turbo Tax):

I have an individual health insurance plan (i.e., not a plan obtained through work), and my employer reimburses me for my coverage. However, they reimburse me by directly adding that amount of money to my paycheck each month, rather than through any formalized process. This is causing my overall wages to appear larger, therefore increasing the amount of taxes that I owe. The reimbursement they give me for it is only used for health insurance - it does not serve as payment for my work there. How can I account for this so my wages are accurate?

Basically, I shouldn't have to pay taxes on this money. Their reimbursement for my health insurance is the equivalent of me choosing the free employer-provided healthcare plan. Yet right now I owe ~$400 because the reimbursement increased my wages, and therefore my taxes. I'm determined to fix this and get my refund instead.
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Offline mellenORL

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Re: Ask FQA!
« Reply #94 on: February 03, 2016, 07:07:00 pm »
Ask if their CPA will provide a form to you, as there likely is already something in the IRS catalog of tax forms that addresses your situation. It's probably at least listed in your company's corporate income tax filing. The CPA can also start a consult with the IRS in a letter if for some reason there is not an existing format to use for this. It should be doable. You might have to file for an extension to give the bureaucratic wheels some time to grind through it. Extensions are free to file, and do not change the amount you owe, if anything (no interest or penalty). BTW, you did take the medical expenses/insurance deduction already, correct?
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Offline Sleepy

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Re: Ask FQA!
« Reply #95 on: February 04, 2016, 12:18:02 am »
Is that the deduction requiring medical expenses to be 10% or more of your income, or are you referring to a different one? The only deduction I recall seeing in Turbo Tax applied to plans bought through the government marketplace, which doesn't apply to me.
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Offline mellenORL

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Re: Ask FQA!
« Reply #96 on: February 04, 2016, 11:26:06 am »
If you are using the long form, and not 1040EZ, I believe there is either a line or a mention for a form re medical insurance on Schedule A.

Here's a paste on the topic;

"But you can deduct only premiums that you pay with after-tax money from your own pocket. For example:
If your health insurance premiums are paid entirely by your employer or the government, you cannot deduct the cost.
If you have health insurance through your employer and your share of the premium is deducted from your paycheck pre-tax, you cannot deduct the cost because the premiums were tax-free already.  If you don’t know whether you pay pre-tax or after-tax, ask your human resources department.
If you buy health insurance through the state- or federally run health insurance marketplaces, you can deduct only the portion of the premium you pay out of your own pocket. You cannot deduct the amount of any subsidy.
If you buy an individual or family health insurance plan, either on the open market or through a marketplace, and you pay all of the cost out of pocket, then the whole amount is deductible."
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Offline The_Queen

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Re: Ask FQA!
« Reply #97 on: February 04, 2016, 11:44:53 am »
If you are using the long form, and not 1040EZ, I believe there is either a line or a mention for a form re medical insurance on Schedule A.

Here's a paste on the topic;

"But you can deduct only premiums that you pay with after-tax money from your own pocket. For example:
If your health insurance premiums are paid entirely by your employer or the government, you cannot deduct the cost.
If you have health insurance through your employer and your share of the premium is deducted from your paycheck pre-tax, you cannot deduct the cost because the premiums were tax-free already.  If you don’t know whether you pay pre-tax or after-tax, ask your human resources department.
If you buy health insurance through the state- or federally run health insurance marketplaces, you can deduct only the portion of the premium you pay out of your own pocket. You cannot deduct the amount of any subsidy.
If you buy an individual or family health insurance plan, either on the open market or through a marketplace, and you pay all of the cost out of pocket, then the whole amount is deductible."

The problem with this route is that it still increases her overall taxes. Since you can only deduct medical bills to the extent they surpass 10% AGI. As such, that is 10% of her AGI that she cannot get back. What she is asking is if she can simply deduct those portions that are listed as income because they're not really income.

To put it in perspective, lets say that Sleepface has $50,000 in income, a 60/40 medical plan (without copay, to keep it simple), and $20,000 in medical bills. As such, she is reimbursed $12,000 from her insurer and her total income is listed as $62,000. So, she can only deduct the remaining $8,000 to the extent that it surpasses $6,200. Under this guise, she would only be able to deduct $1,800, for which (assuming an income of $62,000, and a flat rate of 25% to keep it simple), she would only reduce her taxes by $450.

In contrast, if Sleepface could exclude the money as a non-ascension to wealth (therefore not income under AGI), then that would reduce her AGI by $12,000 (instead of $1,800) and would reduce her taxes by $3,000.

So, the difference between the two approaches can mean a difference of a lot of money... I should become a tax lawyer.

ETA: and if she had 80/20 plan, then under the first approach, she would get a $0 deduction because it does not exceed 10% AGI ($4,00 spent after reimbursement) while under the second she would reduce her AGI by $16,000 and her taxes by $4,000. So the first approach would need a lot of luck to even save her a few hundred, while the latter would easily save hundreds, if not thousands, of dollars
« Last Edit: February 04, 2016, 11:56:50 am by The_Queen »
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