http://www.youmansgardner.com/index.php?pageID=10396 en-gb copyright 2012 - Youmans & Gardner, LLC, CPAs cwood297@msn.com cwood297@msn.com Fri, 03 Feb 2012 00:00:00 -0600http://feedproxy.google.com/~r/youmansgardner/~3/QtN97rN9dTw/index.php Although Health Savings Accounts (“HSAs”) have been around for a while, we have had several recent questions from clients concerning this tax benefit. OVERVIEW A HSA can be a cost effective method of providing health care benefits to yourself, your family, or your employees. Eligible individuals can contribute money to a HSA and receive a tax deduction for the contribution amount, within limits. Contributions made by an employer on behalf of an employee aren’t taxable to the employee. In addition, earnings within the HSA and distributions from the HSA to pay for qualified medical expenses are not taxed. WHO IS ELIGIBLE? Individuals are eligible to contribute to a HSA if they are covered by a “high deductible health plan” (see discussion below). In addition, an individual cannot be covered by a health plan that is not a high deductible health plan and provides coverage for any benefit provided by their high deductible plan. There are certain exceptions for additional plans covering accidents, disability, or dental, vision, or long-term, care. For 2011, a “high deductible health plan” is a plan with an annual deductible of at least $1,200 for self-only coverage, or at least $2,400 for family coverage. The maximum annual contribution is $3,050 and $6,150 for self-only and family coverage, respectively. In addition, annual out-of-pocket expenses required to be paid (excluding premiums) for covered benefits cannot exceed $5,950 and $11,900 for self-only and family coverage, respectively. Eligible individuals who have reach age 55 can make an additional “catch-up” contribution, potentially increasing their tax benefit. There are no requirements for the individual to have compensation or for the contribution limit to be reduced due to lack of compensation. However, if an individual is enrolled in Medicare, he or she is no longer an eligible individual and can no longer contribute to their HSA. DEDUCTION LIMITS You are limited to deducting 1/12 of the annual contribution limits for each month that you are an eligible individual. For example, someone under age 55 who meets the eligibility requirements that takes out a “high deductible health plan” for August through November can deduct up to $1,016 (4/12 of $3,050) if self-only coverage or $2,050 (4/12 of $6,150) if family coverage. Individuals who are eligible in the last month of the tax year are treated as if they were eligible for the entire year for limitation purposes. DISTRIBUTIONS As mentioned earlier, distributions made to pay for qualified medical expenses of the individual, or those of his spouse or dependents, are not subject to taxation. Qualified medical expenses generally are those expenses that qualify for the medical expense itemized deduction. Any funds that are withdrawn for purposes other than to pay for qualified medical expenses are subject to taxation. In addition, a 20% penalty applies unless the individual is over age 65 and entitled to Medicare benefits, or no longer has a high deductible health plan. TAX BENEFITS As you may be aware, unreimbursed qualified medical expenses are allowed as an itemized deduction on individual income tax returns. However, you must clear two hurdles before you can benefit from this deduction. First, the medical deduction is limited to 7.5% of your adjusted gross income (“AGI”), so a family with $100,000 in AGI can only deduct the portion of qualified unreimbursed medical expenses that exceed $7,500 in a tax year. Many clients list their medical expenses only to see them disappear due to this limitation. Secondly, your total itemized deductions must exceed your standard deduction before you receive a tax benefit. Contributions to an HSA can be taken “above the line” as a deduction to AGI, so you receive a dollar for dollar deduction without the aforementioned 7.5% limitation which results in a higher tax benefit. CONTACT US If you have questions concerning how you might benefit from a Health Savings Account, contact us [1]. http://www.youmansgardner.com/index.php?pageID=10396#blog1 Tue, 24 Jan 2012 00:00:00 -0600http://feedproxy.google.com/~r/youmansgardner/~3/wooLz6-jUbc/index.php With all of the recent changes in Form 1099-MISC reporting and the upcoming due date to give these forms to payees. I thought it might be good to review the rules. In short, after several pieces of legislation, we are basically right back to where we started. Overview Most often taxpayers (those in a trade or business) are required to issue a Form 1099-MISC to a payee who received at least $600 for rents, services (including parts and materials), prizes, awards, other income payments, medical and health care payments, crop insurance proceeds, and other less common payments received in a calendar year. The Form is generally required to be provided to the payee by January 31 of each calendar year. Copy A of the Form is due to the Internal Revenue Service ("IRS") by February 28 (later if electronically filing). Some payments are exempt from reporting, including payments made to a corporation (including an S corporation), although there are exceptions; payments for merchandise; rents paid to a real estate agent; and certain card payments that are subject to Form 1099-K [1] reporting. Other, less common payments, subject to Form 1099-MISC reporting include royalties or broker payments in lieu of dividends or tax-exempt interest ($10 threshold), any fishing boat proceeds, gross proceeds paid to an attorney, and direct sales of $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment. New Provisions that Never Were In our 2010 Tax Letter we informed you of a change to payment reporting that was to require landlords to issue Forms 1099-MISC for payments meeting the above conditions. This law was repealed on April 14, 2011. Also, on April 14, 2011, a provision requiring all payments for $600 or more in a calendar year for goods and services paid to both corporate and non-corporate taxpayers was repealed. This greatly reduced the expected paperwork burden on many businesses and landlords. New for the 2012 filing season (2011 returns) In a new twist for 2011 income tax forms, the IRS is asking business taxpayers to answer two questions on their income tax returns. First, "Did you make any payments in 2011 that would require you to file Form(s) 1099?," followed by "did you or will you file all required Forms 1099?" These questions are meant to deter cheating in information return filing and make it easier to assess penalties for noncompliance, so be sure you have followed the rules and are able to answer these questions correctly. Contact us to discuss how our accounting & bookkeeping [2] services can help you meet your reporting obligations. http://www.youmansgardner.com/index.php?pageID=10396#blog2 Sat, 14 Jan 2012 00:00:00 -0600http://feedproxy.google.com/~r/youmansgardner/~3/IwFGGKrJmh4/index.php Due to fact that April 15 falls on Sunday and April 16 is Emancipation Day in Washington, D.C. the due date for filing and paying 2011 individual income taxes will be Tuesday, April 17, 2012. The April 17 deadline applies to any return or payment normally due on April 15. It also applies to the deadline for filing an extension and for making 2011 IRA contributions. http://www.youmansgardner.com/index.php?pageID=10396#blog3 Sat, 14 Jan 2012 00:00:00 -0600http://feedproxy.google.com/~r/youmansgardner/~3/O5pe9MdOhwU/index.php Following is important information about a change in the amount of FUTA (940) taxes that employers in certain states must pay for 2011. The 20 affected states are: * Arkansas * California * Connecticut * Florida * Georgia * Illinois * Indiana * Kentucky * Michigan * Minnesota * Missouri * North Carolina * New Jersey * Nevada * New York * Ohio * Pennsylvania * Rhode Island * Virginia * Wisconsin If you're an employer in any of these states, you'll be required to pay a credit reduction of .003 of the $7,000 FUTA wage base on your 2011 940 return (Indiana and Michigan employers will need to pay .006 and .009, respectively). For budgeting purposes, this will result in a maximum increase of $21 per employee due and payable with your 2011 Employer's Annual Federal Unemployment (FUTA) Tax Return (Form 940). Please note, Indiana will be a maximum of $42 per employee and Michigan will be a maximum of $63 per employee. Please refer to the bottom right section of Schedule A (page 3), which will show you the credit reduction you'll owe. This additional amount will be due with your FUTA tax return. For more information on the credit reduction, please refer to the 2011 Instructions for Form 940: http://www.irs.gov/pub/irs-pdf/i940.pdf [1] If you have any questions, please call us at (229) 246-1511. http://www.youmansgardner.com/index.php?pageID=10396#blog4