by admin | Nov 30, 2022 | Blog
A Health Savings Account (HSA) is an individually owned, tax-favored account that allows participants to pay for qualified healthcare expenses, such as pregnancy test kits, eyeglasses, and more. Here is an overview of the five potential benefits that an HSA provides.
Benefit #1: HSAs provide triple-tax coverage; meaning contributions are made tax-free, grow tax-free, and can be withdrawn tax-free. This is possible if it’s coupled with a High Deductible Health Plan (HDHP).
Benefit #2: Unused HSA funds are rolled over annually, enabling them to be used for future expenses.
Benefit #3: Contribution limits continue to increase with this account. Participants can now use up to $3,850 in annual funds to pay for healthcare expenses individually. If participants wish to use up funds for family coverage, the annual limit is now $7,750.
Benefit #4: Participants who are Medicare eligible, but not enrolled in Medicare, can contribute to an HSA to save for retirement. If 65 or older, HSA funds can also be used without a penalty.
Benefit #5: Even if a participant loses employment, HSA funds can still be used to pay for qualified expenses. However, the ability to continue contributing depends on if the participant chooses to enroll in an HSA qualified health insurance plan either through COBRA, their new employer or an individual policy.
by admin | Nov 29, 2022 | Blog
With the contribution limits set to increase for Flexible Spending Accounts (FSAs) in 2023, now is a good time to debunk any myths that are often associated with FSAs. Here are easy to understand answers to common FSA questions.
Will I lose the money in my FSA if I don’t use it?
Not if you plan properly. You can utilize the carryover option, which allows you to carryover as much as $610 in unused funds from an existing plan to the next.
How is my FSA funded?
It is funded by your employer. Based on how much you decide to contribute (up to $3,100), your employer then places the contributed amount into your account and deducts equal amounts from your paycheck each pay period.
When is my FSA funded?
Your full year’s contribution is available on the first day of the plan year, even though you pay it back through payroll deductions throughout the year. Think of it as an interest-free loan.
Who owns my FSA?
Your employer. However, any unused funds go back to them if you leave the company.
What expenses are eligible for my FSA?
Eligible expenses include out-of-pocket costs not covered by an insurance plan, notably copayments, deductible expenses, coinsurance, and prescriptions. Costs for healthcare products and services are also eligible.
by admin | Nov 29, 2022 | Blog
During the first week of November, the IRS announced 2023 contribution limits for all Flexible Spending Account (FSA) plans. Below is an overview of the limit increases across all the types of FSAs except for Dependent Care FSAs, which remain the same at $5,000 per year.
Health Care Flexible Spending Account (HCFSA)
This account provides employees the option to set aside money on a pre-tax basis to pay for eligible medical, dental and vision expenses. The maximum contribution limit is set to increase from $2,850 to $3,050. This new amount will also apply to Limited Purpose FSAs.
Carryover Limit
The FSA Carryover allows employers the ability to transfer a maximum amount of remaining FSA balances from a current plan year for use in the following plan year. This is available for Health Care and Limited Purpose FSAs only. The limit increase to this account is now $610, compared to 2022’s limit of $570.
Commuter Benefits
This account helps employees pay for certain parking, mass transit and/or vanpooling expenses using pre-tax dollars. The contribution limits will increase from $280 to $300.
Adoption Assistance
An Adoption Assistance FSA assists employees in paying for adoption expenses such as agency fees and court costs. The contribution limit for this account is now $15,950, up $1,060 dollars from the 2022 amount ($14,890).
For more information about this major change and how it may impact you, read our latest handout.
by admin | Nov 7, 2022 | Blog
The IRS has released a draft version of the 2023 instructions for Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding).
For those unaware, withholding agents file Form 1042-S to report amounts paid to foreign persons (e.g., salaries, interest, dividends, premiums, pensions, scholarships, and grants) from sources within the U.S. during the preceding calendar year that are subject to withholding. Copy A of Form 1042-S must be filed with the IRS even if:
- No tax is withheld because the income was exempt from tax under a treaty or under the Internal Revenue Code, including the exemption for income effectively connected with conducting a trade or business in the United States.
- The amount withheld was repaid to the recipient. This means that Form 1042-S should not be filed if the amount is required to be reported on Form W-2 or 1099.
The instructions have been updated to reflect requirements under IRS Codes 1446(a) and 1446(f) that apply beginning January 1, 2023. These requirements apply to brokers effecting transfers of interests in publicly traded partnerships (PTPs). In addition, two new income codes (57 and 58) and a new chapter 3 status code (39) have been added for new requirements, beginning in 2023.
Regardless if Form 1042-S is filed on paper or electronically, the form is due by March 15 of the following year. Additionally, Form 1042-S must be furnished to recipients of the income by March 15.
Note: Filers of 250 or more Forms 1042-S must file the forms electronically. However, the Taxpayer First Act of 2019 authorizes the Treasury and IRS to issue regulations that reduce the 250-return electronic filing requirement. The IRS has stated that until final regulations are issued, the threshold will remain at 250 returns.
Source: Thomson Reuters
by admin | Nov 1, 2022 | Blog
The IRS has announced the 2023-dollar limits and thresholds for retirement plans, which reflect the latest cost-of-living adjustments.
Note: Dollar limits and thresholds primarily affecting health and welfare plans were announced last week. Here are the limits most relevant to 401(k) plans:
- Annual Additions: The limit on annual additions (i.e., contributions) to 401(k) and other defined contribution plans will increase to $66,000 (up from $61,000).
- Compensation: The annual limit on compensation that can be taken into account for contributions and deductions will increase to $330,000 (up from $305,000).
- Effective Deferrals: The annual limit on elective deferrals will increase to $22,500 (up from $20,500) for 401(k), 403(b), and 457 plans, as well as Salary Reduction Simplified Employee Pension Plans (SARSEPs), and to $15,500 (up from $14,000) for Savings Incentive Match Plan for Employees (SIMPLE) plans and SIMPLE IRAs.
- Catch-Up Contributions: The annual limit on catch-up contributions for individuals aged 50 and over will increase to $7,500 (up from $6,500) for 401(k) plans, 403(b) contracts, 457 plans, and SARSEPs, and to $3,500 (up from $3,000) for SIMPLE plans and SIMPLE IRAs.
- HCE: The threshold for determining who is a highly compensated employee (HCE) will increase to $150,000 (up from $135,000).
- Key Employee: The threshold for determining whether an officer is a “key employee” under the top-heavy rules (as well as the cafeteria plan nondiscrimination rules) will increase to $215,000 (up from $200,000).
- SEP Participation: The threshold for determining participation in a SEP or SARSEP will increase to $750 (up from $650).
- Saver’s Tax Credit: The upper income limit for determining whether certain individuals are eligible for the saver’s tax credit (also known as the retirement savings contributions credit) will increase to $73,000 (up from $68,000) for married filing jointly; to $54,750 (up from $51,000) for head of household; and to $36,500 (up from $34,000) for all other taxpayers.
The IRS has also announced that the amounts for determining who is a “control employee,” a classification relevant to the valuation of company fringe benefits, will increase to $130,000 (up from $120,000), and to $265,000 (up from $245,000) for other employees. In addition, the Social Security Administration separately announced the annual adjustment to the Social Security taxable wage base, which is relevant for various benefit purposes.
There are notable increases in the retirement plan contribution limits for 2023 compared to recent years. Plan sponsors, administrators, and advisors will want to carefully note when the new limits and thresholds apply. Employee communications, plan procedures, and administrative forms should be reviewed and updated as necessary to reflect these changes.
Source: Thomson Reuters
