Small Business Taxes & ManagementTM--Copyright 2021, A/N Group, Inc.
The IRS has announced that taxpayers who paid for personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of the coronavirus (COVID-19 PPE) may treat these payments as medical costs under Sec. 213(d). Therefore, amounts paid by an individual taxpayer for COVID-19 PPE for use by the taxpayer, the taxpayer's spouse, or the taxpayer's dependents that are not compensated for by insurance or otherwise are deductible under Sec. 213(d) provided that the taxpayer's total medical expenses exceed 7.5 percent of their adjusted gross income (AGI).
Because these amounts are expenses for medical care under Sec. 213(d) the amounts are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs). Howevver if an amount is paid or reimbursed under a helath FSA, Archer MSA, HRA, or FSA or any other health plan, it is not deductible under Sec. 213.
Group health plans including FSAs and HRAs, under the terms of which expenses for COVID-19 PPE may not be reimbursed, may be amended pursuant to Announcement 2021-7 to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning or or after January 1, 2020, and such an amendment will not be treated as causing a failure of any reimbursement to be excludable from income under Sec. 105(b) or as causing a Sec. 125 cafeterian plan to fail to meet the requirements of Sec. 125. Group health plans may be amended pursuant to this announcement if the amendment is adopted not later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, no amendment with retroactive effect is adopted after December 31, 2022, and the plan is operated consistent with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date the amendment is adopted.
Copyright 2021 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 03/26/21