Question: Mary’s mother, Martha, lives in a nursing home with an annual cost of $72,000. Fortunately, Martha has a long-term care (LTC) insurance policy that covered $65,000 of those expenses for the 2023 tax year. Mary believes that Martha can deduct all nursing home costs that exceed 7.5% of the adjusted gross income (AGI) of $90,000 reported on Martha’s I Schedule A. However, Martha’s CPA, Sue, disagrees and believes that Martha’s deductions will be limited to the amount not reimbursed through her LTC policy. Who is correct in this scenario and how much of a deduction is allowed by Martha?

Answer: Sue is right. When it comes to deducting medical expenses on your tax return, you can only include the amounts you personally paid out of pocket. Any amounts reimbursed by insurance must be subtracted from the total expenses before you calculate your deduction [§213(a)].

Since Martha’s long-term care policy covered $65,000 of the nursing home costs, she can only use the remaining $7,000 ($72,000 total cost minus $65,000 reimbursement) to determine the deduction.

Martha’s AGI is $90,000. Martha’s filing status is single. She will not be able to deduct the first $6,750 ($90,000 multiplied by 7.5%) in medical and dental expenses on Schedule A. Based solely on the nursing home annual cost, Martha would only be able to include $250 in expenses on Schedule A.

In summary, while Mary might have thought Martha could deduct all her nursing home expenses that exceed 7.5% of her AGI, the rules are clear. The deduction is limited to the expenses Martha actually paid after accounting for any insurance reimbursements. So, Sue’s guidance aligns with IRS regulations, ensuring Martha correctly navigates her tax deductions.

The Financial Crimes Enforcement Network (FinCEN) recently updated its list of FAQs to add or revise the answers to 25 questions addressing the filing of beneficial ownership information (BOI) reports. FinCEN’s extensive list of FAQs provides most of the agency’s guidance regarding the required filing of BOI reports.

Entities that meet reporting requirements created or registered with their secretary of state prior to 2024 must file their initial BOI report by Dec. 31, 2024. Those that were created or registered in 2024 have 90 days from the day they received notice they have been created or registered to file their initial BOI report. Beginning in 2025, newly created or registered entities will have 30 days from the date they were created or registered to file their report.

Notable items added to the FAQ include answers to questions addressing the following issues:

Freedom of Information Act

BOI reports to FinCEN are exempt from disclosure under the Freedom of Information Act (FOIA).

Non-attorney third-party submissions and the practice of law

Whether the submission of a BOI report by a third-party service provider that is not an attorney qualifies as the unauthorized practice of law is generally determined by state law. However, nothing in the Corporate Transparency Act (CTA) or FinCEN’s regulations prevent non-attorney third-party service providers from submitting reports on a company’s behalf if they have been authorized to do so.

Number of beneficial owners to report

A reporting company can have more than one beneficial owner who exercises substantial control, has ownership interests or both. There is no maximum number of beneficial owners who must be reported.

Nobody controls more than 25% of the company

FinCEN expects that every reporting company will be substantially controlled by one or more individuals and will be able to identify and report at least one beneficial owner.

Offices “similar” to the secretary of state

For BOI reporting purposes, most businesses are considered to have been created when the secretary of state or similar office has given notice that the creation or registration is effective. However, the term “similar office” is undefined in the statute.

According to FinCEN, a similar office is any office under the law of a state or tribe – including departments, agencies and bureaus – where or through which a domestic entity files a document to be created, or a foreign entity files a document to be registered to do business in the U.S.

Federal agencies are not similar offices.

Multiple beneficial owners

Multiple company applicants or beneficial owners can be added to a beneficial ownership report. The FAQ provides illustrated instructions on how to do that using FinCEN’s website.

Community property states

If both spouses own or control at least 25% of the ownership interest in a reporting company created or registered in a community property state, both spouses must be reported to FinCEN, unless an exception applies.

Corporate conversions

Depending on the law of a state or tribe and the type of entity undergoing conversion, filing for a conversion may result in the creation of a new domestic reporting company.

When the conversion results in a new domestic reporting company, it is required to file an initial BOI report. Additionally, some conversion filings that don’t create a new domestic reporting company may still require the submission of an updated BOI report.

For example, if a company that goes by the name “Company, Inc.” converts to an LLC and changes its name to “Company LLC,” it may be required to file an updated report because it is a change to required information that had previously been submitted.

Changes in jurisdiction

A reporting company must report the jurisdiction where it was originally created. But if it changes jurisdictions, the company must file an updated BOI report. For example, if a company ceases to be incorporated under California law and incorporates under Texas law, it must submit an updated BOI report.

Registering in other states

A reporting company that filed a BOI report based on its creation or registration in one state does not need to file additional BOI reports in connection with filings of secretaries of state or other offices in additional states when the registration only:

1. Authorizes the existing domestic company under the laws of one state or tribe to do business under the laws of another state or tribe
2. Authorizes a foreign reporting company already registered under the laws of one state or tribe to do business under the laws of another state or tribe

Updated or corrected FinCEN identifier information

Information that is used to request a FinCEN identifier (FinCEN ID) must be updated or corrected using a FinCEN identifier application. A FinCEN ID is a unique identification number issued by the agency that is not required but can simplify the reporting process.

Beneficial owners must report any change in the information submitted no later than 30 days after the change occurred. Individuals must correct any inaccuracies within 30 days of becoming aware of the inaccuracy or having reason to know about it. Reporting companies must update or correct their information by filing an updated or corrected BOI report, as necessary.

As a tax professional, how do you ever really know if the price you charge clients is the ‘right’ price? Between the well-to-do socialite that never blinks an eye at your invoice to the penny-pinching spend-thrift that questions every line item, it can be difficult to gauge if your price sheet is where it should be.

To better understand the dynamics of what makes for a good pricing policy for client services, one must understand the following factors:

• Economic realities of your location
• Extent of services offered
• Experience and designations
• Strength of your value proposition in the market

Factor #1: location, location, location

If you are a tax preparer having just relocated from California to West Virginia, it is likely you may need to revisit the rates you charge for a traditional 1040 return with a single common schedule. Why? Because the economics between both locations tend to vary close to 20%. Furthermore, if you land in an ultra-competitive locale those numbers can differ even more.

Factor #2: supply and demand

While virtual tax offices are growing in number, making distance and location less a factor in everyday business, proper pricing can still hinge on how your tax service offerings stack up to local competitors. Can the consumer get all their tax needs met with you? Or must they inconvenience themselves by seeking other pros to take care of their full tax needs?

Factor #3: does EA mean “earn a lot”?

Do designations matter? More specifically, does all the work you put into becoming (fill in the blank with designation) matter to the everyday consumer? Survey findings provide a clear ‘Yes’ answer to this question. Not only do consumers prefer to do business with tax pros with designations (and the experience that comes with it), but findings also suggest they are willing to pay more for the designee’s services.

Factor #4: a strong value proposition

Taking the previous three factors into consideration, one of the most important factors to building your best and most profitable pricing policy is the strength of your value proposition. Your value proposition is important in that, if effectively communicated, it allows your customers to understand your value in helping them solve their problems. This added consumer confidence makes creation of a more profitable price sheet workable.

Want a deeper dive in creating a profitable price sheet for 2025?

NATP and Wolters Kluwer Tax & Accounting invite you to attend an upcoming free webinar on Thursday, Nov. 14 at 2 p.m. ET, titled ‘Pricing Your Tax Business for Profitability’. In this co-partnered webinar, attendees will hear from Jennifer Van Elzen, member relations & analytics director at NATP, and Loren Fogelman, CEO and success coach to tax firms at the Business Success Solution. Join this wide-ranging discussion as we take an informative look into the findings of the most recent NATP Fee Study report and talk about the steps required to build a value-driven price model for a more profitable tax business. 1 hour of NASBA credit will be offered.

Register now!