KANSAS CITY, Mo.--(BUSINESS WIRE)--Sept. 5, 2003--A new IRS ruling will have Americans scrambling to find receipts for non-prescription drugs. Taxpayers can now submit those receipts for reimbursement through employer-sponsored medical flexible spending accounts, also known as "cafeteria plans."

"The ruling takes effect immediately and will require employers who offer flexible benefit plans to amend them." says Becky Miller, managing director national tax at RSM McGladrey Business Services, a subsidiary of H&R Block, that serves mid-sized businesses and their owners with tax, accounting and business consulting services.

Flexible spending accounts allow workers to pay for certain medical costs with pre-tax dollars. In the past, most plans limited reimbursable expenses to items eligible for the medical expense deduction on an individual's tax return - which excluded non-prescription drugs.

For an individual who annually submits $100 of non-prescription drugs through a flexible benefit plan, this ruling could save the employee between $20 and $40 a year, and the employer almost $8 in payroll taxes.

"The new ruling describes an eligible expense as something that treats a medical condition, rather than merely contributes to one's general well-being," says Miller. Eligible items include pain relievers, antacids, allergy medicine and cold medicine. The ruling excludes dietary supplements like vitamins.

"Responsibility for understanding the IRS ruling and interpreting it properly rests with a company's flexible benefit plan administrators," adds Miller.

About H&R Block

H&R Block Inc. (www.hrblock.com) is a diversified company with subsidiaries that deliver tax, financial, mortgage and business products and services. It is the only major company with subsidiaries offering a full range of software, online and in-office tax solutions, combined with personalized financial advice about retirement savings, home ownership, and other opportunities to help clients to build a better financial future. As the world's largest tax services company, H&R Block served nearly 21 million clients in the U.S. and 11 countries in 2003. H&R Block Financial Advisors Inc. offers investment services and securities products. With more than 1,000 financial advisors serving clients at more than 500 offices, H&R Block Financial Advisors Inc. is a member NYSE, SIPC, a registered broker-dealer and investment advisor. H&R Block Inc. is not a registered broker-dealer and is not a registered investment advisor. H&R Block Mortgage Corp. offers a full range of retail mortgage products. Option One Mortgage Corp. provides mortgage services and offers wholesale mortgage products through large financial institutions and a network of 24,000 independent mortgage brokers. RSM McGladrey Business Services Inc. and its subsidiaries serve mid-sized businesses and their owners with tax, accounting and business consulting services, as well as personal wealth management services.

About RSM McGladrey

RSM McGladrey Business Services (www.rsmmcgladrey.com) offers middle-market companies business and tax consulting, wealth management, retirement resources, payroll services and corporate finance. The firm serves clients from 100 offices in the U.S. and is committed to helping its clients grow and prosper. RSM McGladrey, Inc., a wholly-owned subsidiary, operates the RSM McGladrey Network, an affiliation of 82 independent accounting firms in the U.S. and Puerto Rico and is the U.S. member of RSM International, an affiliation of separate and independent legal entities. RSM International is the sixth largest accounting and consulting organization in the world, with 600 offices in 75 countries.

    CONTACT: H&R Block
             Denise Sposato, 816-932-4908
             dsposato@hrblock.com
                 or
             RSM McGladrey
             Deborah Ely-Lawrence, 952-921-7660
             deborah_Ely_Lawrence@rsmi.com

    SOURCE: H&R Block