Parent's Prescriptions

[Guest Darla K]

I have a client who is trying to claim her mother's prescription drugs for reimbursement.

Is this eligible for reimbursement?

[jsb]

Is her mother her IRS dependent?

[Guest MSMA]

Does/can your client legally claim her mother as a "dependent" for tax purposes? If so, then I would say yes.

[Guest Darla K]

She does claim her mother as a withholding on her taxes.

So is she considered an eligible dependent to claim reimbursements for?

[MGB]

Anyone can claim anyone for withholding allowances (I previously claimed 30, now down to 10, without having any dependents). Withholding allowances may or may not be eligible to be a dependent when they actually file taxes.

You need more information on whether she is claimed as a dependent. The withholding information does not suffice. (Actually, I don't know how you know that information - there is nothing on the withholding form saying who the allowances are supposed to be for.)

[david rigby]

Probably a terminology distinction. Looks like the post meant to state that Mom is claimed as a dependent for tax purposes. MGB is exactly correct that tax withholding is not relevant.

If that is what you mean, then Mom's medical expenses should be "coverable" under the reimbursement account. Note that this answer is not related to whether Mom is a covered dependent under the employee's medical benefits ("health insurance', etc.) sponsored by the employer.

[papogi]

I'm going to backtrack here. There is a difference between dependent exemptions and dependent status for writing off health expenses.

To Claim Dependent Exemption:

1. Live with taxpayer for the whole year, or be related to the taxpayer.

2. Be a U.S. citizen.

3. The dependent cannot file a joint return.

4. Gross income of the dependent must be under $2,900 as of the 2001 tax year. This does not have to be met if the dependent is under 19 at the end of the tax year or a full time student under 24 at the end of the tax year.

5. The taxpayer must provide more than half of the total support of the dependent.

To Claim a Deduction for Medical Expenses on Schedule A (this is the common definition used for FSAs):

1. Live with taxpayer for the whole year, or be related to the taxpayer.

2. Be a U.S. citizen.

3. The taxpayer must provide more than half of the total support of the dependent. If the person is a foster child, the parents typically reveive state funds to cover the child’s expenses. If the parents still provide more than half of the support, then the foster child is a dependent. If the parents do not provide more than half of the support, the parents may still be able to deduct these medical expenses as charitable contributions on Schedule A (they should see Pub. 17).

As long as the mother satisfies the rules under the "To Claim a Deduction for Medical Expenses on Schedule A" section, then expenses should be reimbursable under the FSA. Keep in mind, however, that the 125 plan in question may specify a dependent definition which is more restrictive than this, and that would be allowed. In that case, the only way for the employee to get tax benefits from his mom's expenses is if he tries to write them off on Schedule A, subject to its restrictions.

[Guest MSMA]

Excellant info Papogi (as always!)

I am printing this out and sticking it in our bible (Thompson Publishing's FPH , lol)...

[papogi]

MSMA, the only common exception to the rule about providing more than 50% support is in divorce/separation cases. In most of these cases, both parents can claim medical expenses on the child, even though only one parent may get the exemption and only one would actually be providing more than 50% support. This isn't related to the original question, but your statement that you were going to add this to your Thompson manual made me think I should clarify this point.