I have a client that had significant medical expenses in 2011. They filed claims with their insurance company. Some were reimbursed while others were only partially paid or denied. They appealed certain claims that were denied. For 2011, taxes they claimed the amounts paid out of pocket less what was reimbursed by the insurance company. In 2013, to their surprise, one of the appeals was ruled in their favor and they received an $11K check in the mail. So do you go back and amend 2011 to reflect the med expense deduction less $11K or do you report a portion of it as Other income in 2013. I say a “portion” as I’m not sure how much exceeded the AGI threshold in 2011. If the full amount was able be used as an itemized deduction then we would report the full amount in 2013. I leaning toward reporting as other income in 2013 and adding a statement explaining the circumstance. Thoughts? Much thanks in advance for your input.
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