Year End Approaches – Watch Reporting Patient Service Revenues on Tax Returns

This article is from The Health Group “Health Care Alert”. For more articles like it, please go to

The Internal Revenue Service (“IRS”) is matching 1099s against revenues reported by healthcare providers on their respective tax returns.  While this would not generally be a problem, this matching can result in the receipt of a notice of underpayment of tax if revenue is not appropriately reported.  We have been notified by several providers who received such notices, which could have been avoided.  Responding to these notices requires additional time and cost.
The problem originates from the manner in which the Medicare Administrative Contractors (“MAC’s”) report revenue on the Form 1099.  They include all revenue paid, without any reduction for withholdings from those payments, which may actually relate to prior years.  Accordingly, even though gross revenue is distorted on the return, by reporting gross payments as revenue or receipts and then reflecting reductions to those payments as discounts or other revenue reduction (separate line on the return) you can potentially avoid any notice of underpayment of tax.
Healthcare providers should discuss reporting revenue with those responsible for the preparation of their tax returns to determine their revenue reporting.

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