Thanks to Mom on Dealz for sharing her series, Ask an Accountant! Sharon is married to an experienced accountant. Although tax season is over, tax questions arise year round.
I have been audited for medical expenses for 2008 (my husband became very ill) and have close to 300 individual expenses. If I copy every bill, check, explanation of benefits from the insurance company, flexible spending account reimbursement, credit card bill, prescription receipt, etc., I will be paying for and sending a 12 x 12 box. Will the IRS take scanned documents on CD or do you have another idea? Also, can I write off the time, postage, printer ink and paper to do this?
Typically in an audit, your case should be at a regional level where you have been assigned an agent that should be within driving distance. If that is not the case then I recommend organizing the medical expenses in a 3 ring binder according to how they were listed on the tax return. Have a cover sheet that summarizes each medical expense category like this:
A. Prescrptions $_______
B. Doctors/Dentist $_______
and so on for each one listed on Schedule A. Then provide a stack of copied receipts and verification of payment and reference each page in the bottom right corner for each category A-1, A-2, B-1,B-2 . In an audit situation more is always better and typically if you inundate the agent with a ton of information they are not going to examine every piece of paper. Make it neat and easy to reference where you got the numbers for the tax return and you should be fine. The last thing you want to do is throw a bunch of documents in a box & send it to the agent. This will not work in your favor! Time is never deductible, and there is no deduction for paper, ink, or postage related to tax preparation.
*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.