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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
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Experience:  15+ years tax preparation and tax advice.
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I received a benefit from an Aflac policy. I know I dont

Resolved Question:

I received a benefit from an Aflac policy. I know I don't have to pay taxes on it because the premiums were paid with post tax dollars, but does that money count as a medical reimbursement? The money was paid straight to me and could be used to pay for anything I needed. I am claiming a deduction for my medical bills, but if this counts as reimbursement I won't have enough to claim.
Submitted: 4 years ago.
Category: Tax
Expert:  Wendy Reed replied 4 years ago.

Hello, if this was an Aflac plan for short term disability or accident insurance and paid with after tax dollars, then the payout is not taxable unless it is considered medical reimbursement--which you already know. The question is whether or not the payout is considered reimbursement---without knowing the terms of the policy I can't determine that. However, based on what you are describing, it does not seem so, especially if you did not have to provide itemized bills to Aflac, and they did not label the payment as a reimbursement of medical expenses.

 

Please see page 17 under "cost paid by you" for reference:

http://www.irs.gov/pub/irs-pdf/p525.pdf

Customer: replied 4 years ago.
What information do you need to determine for sure if it is medical reimbursement. I did have to send aflac information showing them I was hospitalized in order to get the refund, but they pay me based on the length of the hospital stay, not the amount of the hospital bills.
Expert:  Wendy Reed replied 4 years ago.

Again, from what you are describing, it sounds like this is not a medical reimbursement, but a payout of insurance for the incidence of being hospitalized. I don't know what type of policy you have, but Aflac has a hospital confinement indemnity policy, and the proceeds are based on the length of stay but are meant for the policy holder to use them as he or she sees fit. This could include using them for expenses which would otherwise not be deductible, and therefore they would not be taxable and would not reduce a deductible expense.

 

Since I cannot see your actual paperwork I can only give you the basics of whether the money would be used to reduce medical deduction. If you are still unsure, the best thing to do would be to ask Aflac if any of the payout represents specific reimbursement of medical expenses. If not, then you do not need to reduce your medical expenses by this amount.

Customer: replied 4 years ago.
I have the Hospital Confinement Indemnity Policy and the Hospital Confinement Sickness Indemnity Policy, so these are not taxable and will not reduce a deductible expense. Sorry to ask you again, it was about $8000 dollars so I want to be sure. I tried to call Aflac, and I am currently holding.
Customer: replied 4 years ago.
I have the Hospital Confinement Indemnity Policy and the Hospital Confinement Sickness Indemnity Policy, so these are not taxable and will not reduce a deductible expense. Sorry to ask you again, it was about $8000 dollars so I want to be sure. I tried to call Aflac, and I am currently holding. I just got off the phone will Aflac and all they told me was that they don't report to the IRS and the money can be used for whatever you would like.
Expert:  Wendy Reed replied 4 years ago.

Whether or not they report it to the IRS is not the issue.

 

If the money can be used for whatever you like and is not "earmarked" by Aflac as a medical expense reimbursement, then I would not reduce your medical expenses by this amount.

Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3345
Experience: 15+ years tax preparation and tax advice.
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