How to categorize a medical bill on a payment plan

Elaine2

I want to be able to show balance due on a hospital bill that is currently on a payment plan. I set up a liability account with the balance due.

However, when I generate a quarterly report of medical expenses though, the payments made paying down the liability account do not show up.

Suggestions on how to resolve these two issues. Maybe I need to generate a different kind of report to show the liability balance???

NotACPA

Do TOOLS, Account List and select EDIT next that Liability acct. Then click the TAX SCHEDULE button at the bottom of the window and set TRANSFERS IN to be your Med deduction tax line.

Also, be sure that you've included this acct in your reports.

NotACPA

Do TOOLS, Account List and select EDIT next that Liability acct. Then click the TAX SCHEDULE button at the bottom of the window and set TRANSFERS IN to be your Med deduction tax line.

Also, be sure that you've included this acct in your reports.

Elaine2

Oh, thank you!— I would have never thought of that.

I'm finally moving beyond intermediate quicken into more complex dynamics of using Quicken.

. . .and yes, the key to this is to be able to include this liability in my reports.

Tom Young

The "correct approach" here is entirely up to you, but here's an alternative approach:

You don't say exactly how you set up that liability Account but from this statement "when I generate a quarterly report of medical expenses though, the payments made paying down the liability account do not show up (as medical expenses)," it's clear to me that you just "told" Quicken the amount the liability and Quicken made an Open Balance entry "magically" creating the liability.

From a pure accounting standpoint you incurred the medical expense when you got the medical service and took on the liability to pay it off over time. To properly show this in the time period the expense was actually incurred, you delete that Opening Balance entry Quicken made and create your own, the entry being:

Debit (increase) the "Medical Expenses" Category $XX,XXX
Credit (increase) the "Medical Costs Owed" Liability $XX,XXX

Your subsequent payments aren't "medical expenses," they go to reduce your Medical Costs Owed liability and that Account will always reflect the amount you owe, until you pay it off.

Now, for statutory purposes (income taxes) you generally don't get to take that deduction until you actually pay some cash to the provider. So with this approach, you'd set up transfers in (payments) as being recorded to the appropriate INCOME TAX medical deduction along these lines:

This approach properly (in my opinion) records the medical expense in the correct period, allows you to always see how much you still owe at any time, and, by using Quicken's Tax Schedule Reports, allows you to correctly take the Schedule A medical deduction per the IRS's requirements.

You're the Chief Accounting Officer here so use whichever approach you want to use.

Elaine2

Q1-Q2 Liability Med EXP.pdf

Q1-Q2 Medical EXP RPT.pdf

Hello Tom and (not a cpa). :-) Thank you both for your input yesterday. I apologize if my question was not clear. I've attached two reports that might clarify my problem—

I followed your suggestions — and of course the more closely I read, the more confused I became. Aaarrrghhh.

My guess is— that the balance of the liability account $1870.29 has to go on a separate report. Bannking summary?

The initial pmt of $2078.78 paid on the USAA Visa— is a different type of credit (banking) and therefore shows up as "paid" in the Medical EXP report.

Thank you so much— Elaine.

volvogirl

For taxes…..you deduct the full amount when you charged it.

You can only deduct the amount of unreimbursed Medical Expenses you actually paid over 7.5% of your AGI.  And then all your itemized deductions has to be more than the standard deduction to get any benefit (so you would only be getting the benefit of the amount that puts you over the standard deduction).

Only what you actually paid during the year.  Medical is deductible the year when you pay it.  If paid by check, it would be when you gave the provider a check. You can only deduct the payments you made but not any interest.

If by credit card, it would be when the charge was made. Putting it on your credit card is the same as paying it.  You can deduct the full amount.  But you can't deduct any interest or penalties you paid on it.

If you put it on a credit card or took out a loan you can deduct the full amount even though you pay it over time. If you are on a payment plan with the hospital or doctor, etc. then it's only the amount you pay. Either way you only can deduct the principal amount, not any interest.

Tom Young

We're still missing - or having to guess at - important information. What would be ideal would be a paragraph or so of the history of the "real world" transaction and how you tried to handle this in Quicken.

But, if the original payment to the medical provider was charged to a credit card and it's the credit card company that's providing the payment plan, then there's certainly nothing wrong with just leaving the balance in the credit card. If the point is that you want to simply keep track of that medical balance and/or payments you've made against it, then the easiest way, outside of Quicken is to look at the credit card's site - probably even the statement too I'd guess - as one or the other will have this information as the credit card company needs to keep track of it too.

If, for whatever reason you feel you must have that liability separate and distinct from the actual credit card balance owed number, that's a bit difficult because the payment transactions and the balance of the medical liability actually resides in the credit card Account. I guess one way of doing this, using my preferred method of recognizing the medical expense when incurred, would be along this line:

Debit (increase) Medical Expense Category $X,XXX.xx
Credit (increase) Big Bank Credit Card Account $X,XXX.xx
To recognize medical expense paid via credit card.

Then, take that liability out of the credit card Account and transfer it to the empty liability Account you've created:

Debit (decrease) Big Bank Credit Card Account $X,XXX.xx
Credit (increase) Medical Expense Liability Account $X,XXX.xx
To move liability to its own Account for visability

The month end statement from the credit card company would reconciled to BOTH the credit card and the medical liability Account. That is, assuming no timing differences the CC statement balance would equal the sum of the two Account's balances.

Each month when you made your payment you could then "split" the payment between the credit card Account and the Medical Liability Account, and each month you'd reconcile using the two Accounts to the one credit card statement.

Elaine2

Tom— thank you for this input.

Clearly, I made things more complicated than they needed to be.

Here's what I ended up doing:

1. Liability account is separate— offline. I manually (gasp) enter pmts. to show reduction of debt.
2. Credit card— paying off. Since there was only one TRX and it is properly categorized, it will show up in the Med exp report
3. Checking account- pmts are categorized as med expenses
4. Create (2) separate reports: one for medical expenses and another of account balances.

Note to self: Do this differently next time. 🤔😊

Many, many thanks Tom! — Elaine.

Tom Young

Well, I'm not following along with you here, I must admit. But if you're getting correct information in your reports and all Account balances are properly stated, then I guess it's working.