Learning Center for Tax and Financial Insights

Article Highlights:Employer Medical Fringe Benefits.Flexible Spending Account (FSA).FSA Annual Contribution Limits.FSA Limited Annual Carryover Provisions.Health Savings Account (HSA).HSA Qualifications.High Deductible Insurance.HSA as a Retirement Vehicle.Comparison Table.Many employers offer health flexible spending accounts (FSAs) and health savings accounts (HSAs) as part of their employee benefits packages. Both plans allow you to set aside money to pay medical expenses with pre-tax dollars, providing a significant tax benefit. But which is the better option?Although FSAs are only available through an employer, you may be able to open an HSA on your own if you have an HSA-eligible health plan through work, your spouse's employer, private insurance, or the insurance marketplace.How Health Flexible Spending Accounts Work - A Health Flexible Spending Account (FSA, also called a “flexible spending arrangement”) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.You don’t pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside. Employers may make contributions to your FSA, but they aren’t required to. With an FSA, you submit a claim to the FSA (through your employer) with proof of the medical expense and a statement that it hasn't been covered by your plan. Then, you’ll get reimbursed for your costs.To learn more about FSAs, contact your employer for details about your company’s FSA, including how to sign up. Facts about Health Flexible Spending Accounts (FSA):The amount you can put into an FSA for 2023 is limited to $3,050 per employer. If you’re married, your spouse can put up to $3,050 in an FSA with their employer too. The amount is indexed for inflation each year.You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you’re married, and your dependents.o You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.o You can spend FSA funds on prescription medications, as well as over-the-counter medicines with a doctor's prescription. Reimbursements for insulin are allowed without a prescription.o FSAs may also be used to cover costs of medical equipment like crutches, supplies such as bandages, and diagnostic devices like blood sugar test kits.o You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:§ It can provide a "grace period" of up to 2-½ extra months to use the money in your FSA.§ It can allow you to carry over up to $610 per year (the 2023 inflation adjusted amount) to use in the following year.Your employer doesn’t have to offer these options. If it does, it can be either one of these options, but notDon’t put more money in an FSA than you think you'll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.Health Savings Account (HSA) - Is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums.

Do you think planning a wedding ceremony is complicated? Wait till you see the possible tax issues involved. If you are getting married this year, there is a long list of things you need to be aware of and plan for before tying the knot that can have a significant impact on your taxes. And there are several tax-related actions you should take as soon as possible after marriage.

Article Highlights:What is the Work Opportunity Tax Credit?Maximum CreditWho Can Claim the Credit?Qualified EmployeesPre-screening and CertificationTax-exempt EmployersSummer is upon us, which signals the need for seasonal employees to fill in for workers who are on vacation during the busy months ahead and even for some gearing up for the upcoming hectic holiday season. However, given the current labor shortage many businesses are facing a tight jobs market. So, it may be time to become creative.One solution might be hiring family members. Financially, it makes more sense to keep the family employed rather than hiring strangers, provided, of course, that the family member is suitable for the job.You might even consider hiring your children to work in your business. Rather than helping to support your children with your after-tax dollars, you can instead hire them in your business and pay them with tax-deductible dollars. Of course, the employment must be legitimate and the pay commensurate with the hours and the job worked. Click here for information related to hiring your children in your business and the associated tax breaks.Another solution might be hiring long-term unemployment recipients and other groups of workers facing significant barriers to employment. Doing so may allow you to benefit from the Work Opportunity Tax Credit (WOTC).The Work Opportunity Tax Credit (WOTC) is a general business tax credit that is jointly administered by the Internal Revenue Service (IRS) and the Department of Labor (DOL). The WOTC is available for wages paid to certain individuals who begin work on or before December 31, 2025.The WOTC may be claimed by any employer that hires and pays or incurs wages to certain individuals who are certified by a designated local agency (sometimes referred to as a state workforce agency) as being a member of one of 10 targeted groups.In general, the WOTC is equal to 40% of up to $6,000 of wages paid to, or incurred on behalf of, an individual who:Is in their first year of employment with the business;Is certified as being a member of a targeted group; andPerforms at least 400 hours of services for that employer.However, an employer cannot claim the WOTC for employees who are rehired.Maximum Credit - Thus, the maximum tax credit is generally $2,400. A 25% rate applies to wages for individuals who perform fewer than 400 but at least 120 hours of service for the employer. Up to $24,000 in wages may be considered in determining the WOTC for certain qualified veterans.

Tax relief is available for people living in areas that are declared disasters by the Federal Emergency Management Agency. To find out whether an area qualifies for federal disaster relief, taxpayers should check https://DisasterAssistance.gov.

Article Highlights: Standard Deductions Personal & Dependent Exemptions Child Tax Credit Home Mortgage Interest Limitations Tier 2 Miscellaneous Deductions Phaseout of Itemize Deductions SALT Limits Moving Deduction Commuting Tax Benefits Personal Casualty Losses Estate Tax Exclusion Tax Brackets Alternative Minimum Tax (AMT) Qualified Business Income (QBI) Deduction By now you have probably gotten used to the provisions in the Tax Cuts and Jobs Act (TCJA) that became effective January 1, 2018. But don’t forget, most of the tax changes made by the TCJA are not permanent and will expire (sunset) after 2025. This will have an impact on long range tax planning and will result in a mixed bag of tax increases and tax cuts. How it will impact individual taxpayers will depend upon which provisions of TCJA affect them. The following is a review of what will happen when TCJA expires if Congress doesn’t intervene. Standard Deductions – The standard deduction is that amount of deductions you are allowed on your tax return without itemizing your deductions. The standard deduction is annually adjusted for inflation. In 2018, the TCJA just about doubled the standard deduction as illustrated in the table below that also illustrates the 2023 standard deduction amounts. With expiration of TCJA the standard deduction will be cut roughly in half. HISTORICAL STANDARD DEDUCTIONS Tax Year 2017 (pre-TCJA) 2018 (post-TCJA) 2023 Married Filing Joint and Surviving Spouse $12,700 $24,000 $27,700 Head of Household $9,350 $18,000 $20,800 Single $6,350 $12,000 $13,850 Married Filing Separate $6,350 $12,000 $13,850 The increased standard deduction under TCJA benefited lower income taxpayers and retirees, whose itemized deductions often were just barely more than the pre-TCJA standard allowance. The increased standard deductions also meant fewer taxpayers claimed itemized deductions – roughly 10% of filers now itemize versus 30% before TCJA – which helped simplify these filers’ returns. Personal & Dependent Exemptions - Prior to 2018, the tax law allowed a deduction for personal and dependent exemption allowances. One allowance was permitted for each filer and spouse and each dependent claimed on the federal return. For the year prior to the TCJA’s suspension of the exemption deduction, the exemption amount was $4,050, which would have been inflation adjusted to $4,700 in 2023. The deduction for exemptions phased out for higher income taxpayers. Child Tax Credit – Prior to 2018 the child tax credit was $1,000 for each child below the age of 17 at the end of the year. With the advent of TCJA the child tax credit was doubled to $2,000 for each child below the age of 17 at the end of the year. This more than made up for the loss of a child’s personal exemption deduction for lower income families. The child tax credit is subject to phaseout for higher income taxpayers. However, TCJA substantially increased the income phaseout thresholds as illustrated in the table below, so much so that the credit became available to middle-income taxpayers. Also of note is the fact that the phaseout thresholds for the credit are not inflation adjusted. As a result, each year the credit benefit is gradually diminished for higher-income taxpayers. CHILD TAX CREDIT INCOME PHASEOUT THRESHOLDS Filing Status Pre-TCJA Post-TCJA Married Filing Joint $110,000 $400,000 Married Filing Separate $55,000 $200,000 Head of Household $112,500 $200,000 All Others $75,000 $200,000 If the credit is allowed to revert to the pre-TCJA amount of $1,000 and the lower income phaseout levels, it will have significant negative impact on families. You may recall that for one year during the Covid-19 pandemic, the child credit amount was increased to $3,000 or $3,600, depending on the child’s age, and other temporary changes were made. Some in Congress want to permanently bring back these enhancements, so that possibility could become part of any legislation negotiations surrounding the sunsetting or extension of TCJA provisions. Home Mortgage Interest Limitations – Prior to the passage of TCJA taxpayers could deduct as an itemized deduction the interest on $1 Million ($500,000 for married taxpayers filing separate) of acquisition debt and the interest on $100,000 of equity debt secured by their first and second homes. With the passage of TCJA, the $1 Million limitation was reduced to $750,000 for loans made after 2017 and any deduction of equity debt interest was suspended (not allowed). A return to pre-TCJA levels will tend to benefit higher income taxpayer with more expensive homes and higher mortgages. Tier 2 Miscellaneous Deductions – TCJA suspended the itemized deduction for miscellaneous deductions for tax preparation fees, unreimbursed employee business expenses, and investment expenses. Most notable of these is unreimbursed employee expenses which allowed employees to deduct the cost of such things as union dues, uniforms, profession-related education, tools and other expenses related to their employment and profession not paid for by their employer. Investment expenses included investment management fees charged by brokerage firms and tax preparation fees, including the cost of tax return preparation and tax planning expenses. These types of expenses were allowed only to the extent they totaled more than 2% of the taxpayer’s adjusted gross income.

Due to the admittedly complicated nature of the tax code in the United States, the idea that someone might experience issues when filing is not exactly unheard of. Oftentimes people will calculate certain aspects of their returns wrong, fail to submit the necessary paperwork, or something similar. That's part of what amended returns are for - eventually, either you or the IRS will discover the mistake and at that point, things can be properly corrected.Of course, the chasm between a "minor accident" and "intentional fraud" when it comes to your taxes is a big one, indeed. The latter can get you into a significant amount of trouble and may even venture into criminal territory if you're not careful.The Case With Criminal Charges and the IRS: What You Need to KnowWhenever this topic comes up, the first question that most people ask involves "What does 'criminal conduct' mean within the context of the IRS, anyway?" The answer, unfortunately, is pretty broad. The government defines it as ANY action you take that violates tax laws or regulations. So if you've claimed a deduction that you weren't entitled to in order to reduce your tax liability, that would be considered criminal conduct. If you underreported your income in an attempt to get a bigger refund, that would be criminal conduct.Just because that may be true doesn't mean the IRS will prosecute anyone and everyone it finds that falls into this category, however.Overall, know that the IRS doesn't go to the trouble of pursuing criminal charges for any old taxpayer with a basic filing issue, regardless of how negligent they may be. Ultimately, it will come down to a few different factors including the severity of the issue in question, whether they can prove an intent to defraud, and of course the Statute of Limitations.To start in the reverse order, know that the Statute of Limitations is the amount of time that the IRS has to legally begin criminal prosecution in the first place. If you haven't filed taxes at all or have underreported your income (and they can prove it), they have six years from the date the correct return was supposed to be in their hands to do anything about it.If you have a fraudulent return, however - meaning you've intentionally lied about things like your income sources - there is no statute of limitations. So don't make the mistake of assuming you'll be able to "wait them out" on this one.