When is a credit card receipt insufficient proof of a bonafide medical expense deduction

[QRFMTOA]

I read somewhere that IRS considers each of the following items sufficient support of a bonafide medical expense deduction.

• A copy of a cancelled check from a bank website,
• A receipt from a merchant credit card machine,
• A bank statement showing a debit card payment, and
• A credit card statement showing a medical expense was charged on your credit card

Under what circumstances might IRS disallow a medical expense deduction supported by one of the items listed above, but allow the very same medical expense deduction supported by on of the following:

• The provider's visit summary report, which would include the provider's name, contact information, and id numbers, DOS, type(s) of service provided, corresponding CPT and diagnosis codes, individual amounts charged, and total amount paid, or
• The provider's annual billing statement, which would include the provider's name and contact information, DOS, corresponding CPT Codes, total amount charged on DOS, and all amounts and dates paid during the year.

[Bsch4477]

All are acceptable. 

[QRFMTOA]

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@Bsch4477 wrote:

All are acceptable. 

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@Bsch4477 

Are you saying that the answer to my "Under what circumstances..." question is "the IRS would not disallow a medical expense deduction supported by one of the items listed above but allow the same expense when provided a supporting Visit Summary Report or Annual Billing Statement during an appeal or audit?

Thanks!

[Bsch4477]

Any of the documentation mentioned would support your medical deduction. 

[rjs]

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@QRFMTOA wrote:

I read somewhere . . .

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Where is "somewhere"? You cannot evaluate the reliability of the information without knowing the source.

I can't find an official IRS statement of the rules for substantiating medical expense deductions. Did the IRS audit your medical expenses and deny the deduction for some expenses? If so, what reason did they give for the denial?

I would think that a credit card receipt by itself might not be sufficient proof for a medical expense deduction. To be sufficient proof it would have to show that the entire amount of the payment was for services or products that are valid deductible medical expenses. An ordinary credit card receipt might not have enough detail about what the payment was for to show that. A payment to a doctor, hospital, pharmacy, or other provider is not necessarily for deductible medical expenses. (Pharmacies, in particular, sell a lot of things that are not deductible as medical expenses. Some medical treatments, such as cosmetic procedures, are not deductible.) If the credit card receipt does not have enough detail, you would have to have some other records to show what the payment was for.

[QRFMTOA]

For the last 5 years, our annual household medical expenses have been between $40,000 and $50,000 and during this time I insisted my wife save every doctor's appointment visit summary, every itemized pharmacy "cash" register receipt, every itemized clinic, hospital, and laboratory invoice, and just to be safe obtain an annual statement from each service provider in the month of February for the previous year. Imagine the work involved!

She will be delighted to know there is absolutely no reason for us to save anything other than our credit card statements and those bank statements that are attached to our debit cards. 

Thanks!

[QRFMTOA]

@rjs wrote:

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@QRFMTOA wrote: I read somewhere . . .
 
Where is "somewhere"? You cannot evaluate the reliability of the information without knowing the source.

From https://ttlc.intuit.com/community/tax-credits-deductions/discussion/what-documents-do-i-need-to-dedu...  ...

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@CathiM wrote:

This IRS requires that you have a receipt or statement showing that you paid for the medical expense.  The explanation of benefits from the insurance company showing your payment responsibility does not prove that you paid it. All of these work: a copy of the cancelled check from bank website, receipt from medical provider showing payment, bank statement showing a debit card payment or credit card statement showing it was charged on your credit card (or the receipt from the merchant card machine), any other document showing your payment.

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From https://ttlc.intuit.com/community/tax-credits-deductions/discussion/documents-required-to-back-up-me... ...

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@Vanessa A wrote:

a. A copy of the check and corresponding bank statement would suffice.

b. Yes, the corresponding credit card statement would be needed

c.  Yes, if you have a receipt from the provider that would be all you needed to show you were billed a certain amount and you paid a certain amount. This is the easiest way to show payment, but depending on your medical bill types and hospital billing procedures, you do not always get a receipt for your payment.  In that case, you credit card statements or bank statements with a copy of your check would be proof. 

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[QRFMTOA]

@rjs wrote:
I can't find an official IRS statement of the rules for substantiating medical expense deductions.

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Neither could I.

@rjs wrote:
Did the IRS audit your medical expenses and deny the deduction for some expenses? If so, what reason did they give for the denial?

No, but with $40,000+ in medical expenses, I am afraid they may and want to be prepared.

@rjs wrote:
I would think that a credit card receipt by itself might not be sufficient proof for a medical expense deduction. To be sufficient proof it would have to show that the entire amount of the payment was for services or products that are valid deductible medical expenses. An ordinary credit card receipt might not have enough detail about what the payment was for to show that. A payment to a doctor, hospital, pharmacy, or other provider is not necessarily for deductible medical expenses. (Pharmacies, in particular, sell a lot of things that are not deductible as medical expenses. Some medical treatments, such as cosmetic procedures, are not deductible.) If the credit card receipt does not have enough detail, you would have to have some other records to show what the payment was for.

I agree with you. The disconnect between what I read on this site and what I thought was a logical approach to the issue is what motivated my inquiry here.

[Critter-3]

If audited the IRS will want to see proof of who you paid and for what.  A CC statement showing you paid a DR or Dentist or Hospital will probably be taken at face value  without the underlying reciept  however  since you can buy lots of non prescription items at say Walgreens the actual reciepts would be smart to keep or get a read out from the pharmacy showing all scripts filled.  

[QRFMTOA]

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@Critter-3 wrote:

If audited the IRS will want to see proof of who you paid and for what... 

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@Critter-3  @Bsch4477   @rjs  

I see the statement "IRS requires you to have a receipt or statement showing that you paid for the medical expense."

Two thoughts come to mind when I put my thinking cap on.

1. Those people who say a receipt or statement satisfies IRS requirement for a receipt or statement showing that you paid for the medical expense [you intend to deduct], are right, but...
2. I suspect, when push comes to shove and shove comes to punch, IRS also burdens the tax filer to prove the medical expense was a bona fide expense paid to a proper medical provider.

Clearly, a credit card receipt or back statement does not contain the information to satisfy this burden, but a Visit Summary Report or Annual Billing Statement most probably does.

Comments? Thoughts?

[Critter-3]

As I taught my tax course students ... look at the situation from the IRS auditor's perspective.   If you say you paid your dentist $1000 and it shows that on a CC statement as a payment to Dr. X DDS  then could the auditor agree that the money was paid for only dental work ?   I would say yes  but  if you went to Walgreens or Walmart for your prescriptions and all you had was the CC statement then it could easily be denied since you can buy a lot from those places that are not deductible prescriptions.  

I have the same issue with my bookkeeping clients ... I only get their bank/CC statements and not the actual reciepts so they have to guess/determine  what they bought at say WAWA... (I do ask for the recipts if the clients cannot tell me what it was for exactly ... of course I get to know the buying habits of my clients and request they don't use the business CC  for personal expenses and some actually comply when I stress the negatives of being audited).  If they paid $60 then it probably was gas for the car/truck  or  $15  fuel for the mowers  but  $.99 was probably a fountain drink.  The auditor will want substantiation of the expenses if audited and the CC/bank statements will probably not be enough and it is on the taxpayer to provide the proof.  

[Opus 17]

@QRFMTOA 

You need to prove what service you paid for, and that it is a qualified medical expense, not just the amount.  That might not require saving every scrap of paper, but it's more than just a credit card statement. 

My last visit to the optometrist, I paid over $1500 for the visit, 3 pair of glasses, and some vitamins that are supposed to reduce eye floaters.  The visit and glasses are allowable but the vitamins are not.  If I was audited and only had a credit card bill for $1500, what should the auditor do?

I use a pharmacy located in a grocery store.  How would I prove without receipts that I paid for a prescription instead of groceries?  If I have 100+ credit card charges for that grocery store over the course of the year, how does an auditor know which ones were for qualified medical expenses like prescriptions?

Here is a quote from a Tax Court case.

As we have observed in countless opinions, deductions are a matter of legislative grace, and the taxpayer bears the burden of proof to establish entitlement to any claimed deduction. This burden requires the taxpayer to substantiate expenses for deductions claimed by keeping and producing adequate records that enable the Commissioner to determine the taxpayer's correct tax liability. A taxpayer claiming a deduction on a Federal income tax return must demonstrate that the deduction is allowable pursuant to some statutory provision and must further substantiate that the expense to which the deduction relates has been paid or incurred. [citations omitted]

Here's a quote from an IRS training guide for tax preparers.

When the TP establishes that the TP paid or incurred deductible expenses but does not establish the amount of the deduction to which TP is entitled, TP may be entitled to estimate the amount allowable. Cohan v. Comm’r, 39 F.2d 540 (2d. Cir. 1930). 

• “To qualify for the estimation treatment under Cohan, the taxpayer must establish that he is entitled to some deduction.”

• “A court should allow the taxpayer some deductions if the taxpayer proves he is entitled to the deduction but cannot establish the full amount claimed”

• “bearing heavily ... upon the taxpayer whose inexactitude is of his own making”

[Critter-3]

Amen.   For the pharmacy bills ... most pharmacies will print out an annual summary upon request eliminating the need to keep hundreds of individual reciepts.