Flexible Spending Account Archives

Heads Up! Four Things You Need to Know Before the End of Tax Year 2024

By Office Staff|2024-12-11T16:29:52-08:00December 11, 2024|Categories: Tax Planning|Tags: Beneficial Ownership, Flexible Spending Account, Individual Retirement Account, Tax-deferred Retirement Accounts|0 Comments

As the calendar year draws to a close, changes to the tax code and regulations are inevitable — regardless of which political party holds sway in Washington, D.C., or controls state legislatures in California or elsewhere.

The end of 2024 is no exception, with several updates that could save you or your business money as we enter the new year or leave you with less of your hard-earned money in 2025.

Here are four items to be aware of as we approach year-end:

Maxing out your tax-deferred retirement contributions
FSA contribution limit increases for 2025
Qualified charitable distributions for eligible IRA owners by year-end
Recent change to Beneficial Ownership Information (BOI) reporting

As we’ll explore below, there’s still time to take advantage of the first three tax-saving opportunities before the year ends. For the fourth item — beneficial ownership information reporting — while you also have time to file before the beginning of the year, a recent court ruling favors anyone concerned about the prospect of facing fines or criminal charges for failing to do so.

Here’s what you need to know to make informed decisions before 2024 comes to a close.

Maxing Out Your Tax-deferred Retirement Contributions

For 2024, the IRS has increased contribution limits for various retirement accounts: Continue reading… Continue reading… Continue reading…

IRS Issues Tax Inflation Adjustments for Tax Year 2024

By Office Staff|2023-11-15T13:23:26-08:00November 15, 2023|Categories: Taxes|Tags: Adoption Tax Credit, Alternative Minimum Tax, Cost of Living, Earned Income Tax Credit, Flexible Spending Account, Marginal Rate, Medical Savings Account, Standard Deduction|0 Comments

Nobody likes paying more for something, but inflation does have its perks. For instance, you get to pay off debt with inflated dollars. And if you’re retired, you get annual cost of living adjustments (COLAs) reflected in your monthly Social Security payments. In addition, the Internal Revenue Service (IRS) helps to soothe the sting by making annual inflation adjustments.

These adjustments include changes to:

Standard deduction amounts
Marginal rates
Personal exemptions
Flexible Spending Accounts (FSAs)
Medical Savings Accounts (MSAs)
And more

The purpose of these adjustments is to help you avoid being pushed into a higher tax bracket or experience a reduction in the value of credits and deductions due to inflation.

Recently, the IRS announced its annual inflation adjustments for more than 60 tax provisions for tax year 2024, including the tax rate schedules and other tax changes. In this post, we highlight key changes that are likely to impact most taxpayers. (For more details, please see the IRS’s Revenue Procedure 2023-34.)

The tax year 2024 adjustments described below generally apply to income tax returns filed in 2025.

Standard Deduction

The standard deduction for tax year 2024 rises to: Continue reading… Continue reading… Continue reading…

Dependent Care Assistance Plan COVID-Related Carryover and Tax Relief

By Office Staff|2021-08-26T13:40:17-07:00August 26, 2021|Categories: COVID-19|Tags: Consolidated Appropriations Act of 2021, Dependent Care Assistance Plan, Flexible Spending Account|0 Comments

According to the law of unintended consequences, decisions and actions always cause unforeseen effects. One of the many unintended consequences of the COVID-19 lockdowns is that many parents and guardians haven’t had to pay nearly as much for daycare in 2020 and 2021 as planned, because they’ve had to keep their young children home.

On its surface, paying less for daycare seems like a good thing — offsetting the inconvenience and burden of having to work at home and care for the children. However, parents and their employers who contributed thousands of dollars to dependent care assistant plans (DCAPs) are understandably concerned and confused about what will happen to that money.

DCAPs have contribution limits, use-it-or-lose-it deadlines, and limits on the amount that can be withdrawn and used each year tax-free. Parents and employers carefully calculate their contributions each year to maximize their tax savings while at the same time avoid the possibility of contributing more than they’ll use and losing the excess.

The COVID-19 lockdowns reduced childcare expenses for many parents, resulting in large excess contributions in DCAP accounts. Luckily, government agencies have provided relief to resolve the issue, but now employers and employees are scrambling to take advantage of the relief and understand the new rules, which is the focus of this week’s post.

Dependent Care Assistant Plan (DCAP) Basics

A DCAP or dependent care flexible spending account (FSA) is an employee benefit plan that provides tax relief to help employees pay for the care of a qualifying dependent. The Internal Revenue Service (IRS) regulations that govern DCAPs (pre-COVID relief) include the following: Continue reading… Continue reading… Continue reading…

Improving Your Medical Benefits While Cutting Your Taxes, Part 7: Small Business Guide to Reducing Your Tax Burden Legally

By Office Staff|2020-10-08T20:48:38-07:00September 9, 2020|Categories: Small Business Guide to Legally Reducing Your Tax Burden|Tags: Flexible Spending Account, Health Savings Account, Medical Benefits, Medical Expense Reimbursement Plan|0 Comments

The Affordable Care Act (ACA), dubbed “Obamacare,” made health care much less affordable for many small-business owners. It led to higher health insurance premiums, while doing little to nothing to rein in the spiraling costs of doctor visits, diagnostic tests, pharmaceuticals, and hospital care.

As a result, many small-business owners have dropped their healthcare coverage, which is not something we recommend. That’s because a single unforeseen individual or family illness could stick you with a bill that could drive you into bankruptcy. What we do recommend is that you make healthcare more affordable for yourself and your family by taking full advantage of every tax break available for healthcare expenses.

You are probably already aware that if you pay for your own health insurance, you’re allowed to deduct it as an adjustment to income. You’re probably also aware that if you itemize your deductions, you’re allowed to deduct unreimbursed dental and medical that exceed 7.5 percent of your adjusted gross income. However, most of us don’t spend that much on healthcare, and since the standard deduction nearly doubled with the passing of the Tax Cut and Jobs Act of 2017, many of us don’t itemize. As a result, we end up losing a lot of money in otherwise legitimate deductions.

Here’s an idea. What if there was a way to write off medical bills as business expenses? Actually, there are three ways:

Medical Expense Reimbursement Plan (MERP)
Health Savings Account (HSA)
Flexible Spending Account (FSA)

Pro Tip: Take a big-picture approach to healthcare costs. While a high-deductible healthcare plan costs less and makes you eligible to contribute to a health savings account (HSA) and pay out-of-pocket costs out of that account tax-free, a low-deductible plan that covers more expenses may be more cost-effective for your family depending on your situation. Here at Stees, Walker & Company, LLP, we can help you evaluate different plans and choose a plan that’s best for your overall finances.

In any event, in this post we cover each of the three ways to legally write off medical bills as business expenses, starting with the use of an MERP (medical expense reimbursement plan).

Medical Expense Reimbursement Plan (MERP)

The first thing to know about a MERP (also known as a 105 plan) is that it’s an employee benefit plan. That means it requires an employee: Continue reading… Continue reading… Continue reading…