More Ways to Lighten Up – May 2017 Newsletter


In my never-ending quest for ways to liberate people from paper I discovered some things while preparing for taxes this year.  The catalyst for my research was the specter of my husband going on Medicare this year.

The issue is a situation I see a lot in home filing systems, involving a couple of kinds of documents that people keep out of a low-grade fear that they “might be needed”. Sound familiar?

In an effort to lighten up on the volume of kept paper, these documents tend to be sticky, because they masquerade as possible tax related information. The minute you say “IRS” even the most ruthless of “paper-tossers” pauses. I have finally teased this apart with the help of my very own CPA.

First what are these documents and do you care?

They are about medical expenses and how insurance is handling the payment of your claims.  Period.

The possibility that you can deduct your expenses from your tax bill is a totally different question and is documented by your actual receipts.  Before you even go further, the question must be asked: might you even be eligible? These are the rules for this year,and they DO change!

The IRS allows you to deduct qualified medical expenses that exceed 10% of your adjusted gross income for the year. Your adjusted gross income (AGI) is your taxable income minus any adjustments to income such as deductions, contributions to a traditional IRA and student loan interest.

More on HOW to Claim

If YES, then my discoveries can help you at least reduce some of the load you face.

If NO, then keeping any of these documents is a choice you’re making to manage a bunch of possibly useless paper.

1. Explanation Of Benefits; henceforth referred to EOB’s. These documents tend to be very confusing and often do not come in a sequential order related to your actual appointments. The real point of the document is tracking the progress of your claims (use of the insurance policy) against how the insurance policy paid for things…and any gaps which you must pay.

Here is the most important thing to recognize: EOB’s are for YOUR use in tracking what you may owe. They are NOT TAX DOCUMENTS. The IRS will never give a hoot about them, and they are NOT receipts for payments you have made.

2. Medicare Summaries. Again, these are about your various policies with Medicare and are NOT considered receipts for payments. They MIGHT be useful for tracking your medical care, but are not verification of any expenses you actually paid.

The insidious thing about this stuff is that each mailing you get includes several pieces of standard “boiler plate” information, which bloat the envelope to at least twice its pertinent size. This includes privacy policies, appeals information, and other procedural info that is just as easily found online or via a phone call. This is where your judgment is required. I encourage you to toss the boilerplate stuff and make a careful decision about the rest.Keeping these documents can help you understand your policies and make sure things are covered. They might be useful in confirming when you saw and paid non-policy providers.

This is the main point; a CPA explained that these documents are irrelevant for tax filing, and if you do intend to try for a medical deduction the main information is a dollar amount based on actual proof of payments made.

These relevant amounts are:  insurance premiums PAID including parts of Supplemental Medicare, and all out-of-pocket expense not covered by the policy.

My CPA had no interest in being given or even seeing the stack of receipts as long as I did the worksheet with the amounts and could promise to provide them in case of an audit.

Back to the few pages of meaningful paper in those EOB and Medicare mailings; here are some reasons to keep them:

Exceptions:  I do acknowledge that there are some mighty complicated situations out there:

  • People with multiple providers who bill differently
  • Self-employed individuals that want to track their policies carefully (I’m one!)

My hope is that this information can help you decide what to keep based on your real situation, not an imaginary one where the IRS comes knocking.

May your filing cabinet be lighter and your mail more quickly purged!

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