Supplemental Accident Insurance Disbursement - Taxable?

[onecoolcat]

I think I may have screwed up my taxes.  I had a supplemental accident insurance policy and had a pretty significant accident last year.  I incurred around $5,000.00 in medical bills for my deductible and co-pays.  I made a claim and ended up getting a $3,500.00 from my supplemental insurer.  They sent me a 1099-MISC.  Before I input this as miscellaneous income my wife and I were getting a $960ish return but after I input the money we only got $240ish return.  I was thinking that since I actually paid out for my accident upfront, would the check actually be miscellaneous income?  Could I have written it off since I paid more in medical bills?

[DevoCPA]

input $3,500 in medical cost in the same place you inputting the income to zero out. $1,500 goes to Sch A, not $5,000.

[onecoolcat]

input $3,500 in medical cost in the same place you inputting the income to zero out. $1,500 goes to Sch A, not $5,000.

Turbo Tax doesn't have a medical cost option in the 1099-MISC menu.  It only asks what "Box 3" says, which is the "other income" box. 

I input the information for schedule A but Turbo Tax didn't file it because it decided the standard deduction would net me the larger return.  Can I take a deduction for the $3,475.00 I got from accident insurance (write off the 1099-MISC with my medical expenses that exceed this amount) and still take the standard deduction?

[onecoolcat]

I've read up on this a bit and am getting conflicting advice from various sites.  I may be shit out of luck if my supplemental policy paid me for being in an accident rather than reimbursed me for my expenses accruing from the accident.  I'm concerned my policy was drafted in a way where I got a flat fee for breaking my arm and a flat fee for going under the knife without regard to what the costs were which makes me think I was paid for being in the accident.

However, other sites mentioned that if the employee paid for the supplemental policy and they were taxed on those dollars then they shouldn't be taxed on the money they receive from the policy.  I did pay the premium on the policy and I was taxed on premium.

I'm not quite sure of what to believe.

[Need2Save]

Is this a policy you purchased through your employer or directly with the insurer? I wasn't sure.   Also - is your plan called a Supplemental Disability Income Policy or a Supplemental Accident Insurance policy?  In otherwords, was the benefit calculated based on missed-earnings or simply a flat amount for a specific kind of injury?  There are 2 general kinds of policies so sometimes they are named similarly but they are for two distinct coverages.

If you got the policy through work - ask them for a copy of the Summary Plan Description (SPD) or the Policy Certificate which should lay out whether the benefits are taxable or not.  Typically, a policy paid for with after-tax funds will not be taxable. 

[onecoolcat]

Is this a policy you purchased through your employer or directly with the insurer? I wasn't sure.   Also - is your plan called a Supplemental Disability Income Policy or a Supplemental Accident Insurance policy?  In otherwords, was the benefit calculated based on missed-earnings or simply a flat amount for a specific kind of injury?  There are 2 general kinds of policies so sometimes they are named similarly but they are for two distinct coverages.

If you got the policy through work - ask them for a copy of the Summary Plan Description (SPD) or the Policy Certificate which should lay out whether the benefits are taxable or not.  Typically, a policy paid for with after-tax funds will not be taxable.

I got the plan through my employer and it is a Supplemental Accident Insurance Policy that pays a flat amount for narrowly defined injuries and medical care arising from the injury.  For instance, I received something like $600 for breaking my shoulder and another $2500 because surgery and inpatient care was necessary.  The premiums are deducted from my paycheck and unlike my health insurance, it was take out post-tax.

Thank you, I will request the Summary Plan Description and Policy Certificate from HR tomorrow.