The IRS has recently released an updated version of Publication 969 for use in preparing tax returns for the 2007 fiscal year. Publication 969 pertains to tax favored health accounts, including information regarding Health Savings Accounts, Health Reimbursement Arrangements, Flexible Spending Accounts, Archer Medical Savings Accounts, and Medicare Advantage Medical Savings Accounts.

The updated document reflects the new 2007 limits for HSAs and incorporate changes made by the Tax Relief and Health Care Act of 2006 which took effect in 2007. Among these changes were the elimination of the annual HDHP deductible cap on HSA contributions and the addition of the “last month rule” which treats individuals who become HSA eligible on Dec. 1st as being HSA eligible for the entirety of the tax year. There is also updated information on qualified HSA distributions from FSAs and HRAs, distributions from IRAs, and instructions on how to properly report any 10% tax penalties on 1040 forms.

To read IRS Publication 969, click here.

This notice clarifies that an individual may be claimed as a dependant if they meet all other requirements of dependant status and if the individual’s parent (or other person with respect to whom the individual is defined as a qualifying child) is not required by section 6012 to file an income tax return and (i) does not file an income tax return, or (ii) files an income tax return solely to obtain a refund of withheld income taxes.  If, however, the parent (or other person with respect to whom the individual is defined as a qualifying child) is not required to file an income tax return, but does so to obtain a refund of withheld income taxes and also claims the Earned Income Credit, then the dependant may not be claimed by any other person.

For more information, click here.

New ruling holds that amounts paid for diagnostic and certain similar procedures and devices, not compensated by insurance or otherwise may be tax deductible. While the ruling admits that the diagnosis of a physician is important, it is not always necessary to determine a deductible expenses if the expenses are for items that are wholly medical in nature and serve no other function in daily life.

For more information on expenses which may be deductible, click here.