IRS issues 2022 version of publications 502 and 503 for medical and dependent care expenses

IRS issues 2022 version of publications 502 and 503 for medical and dependent care expenses

The IRS has released updated versions of Publications 502 and 503 for the 2022 tax year. Publication 502 describes the medical expenses that are deductible by taxpayers on their 2022 federal income tax returns. Publication 503 explains the requirements that taxpayers must meet to claim the dependent care tax credit (DCTC) for child and dependent care expenses. 

The 2022 version of Publication 502 is substantially similar to its 2021 counterpart. Reflecting prior guidance, personal protective equipment (e.g., masks, hand sanitizer, and hand sanitizing wipes) for the primary purpose of preventing the spread of COVID-19 is now included in the list of medical expenses. Clarifications have been added regarding expenses to treat excessive use of alcohol and drugs, and relevant dollar amounts (e.g., the standard mileage rate for use of an automobile to obtain medical care) have been revised to reflect their 2022 inflation-adjusted values. Publication 502 has also been revised to reflect that the health coverage tax credit (HCTC) is not available after 2021. Publication 503 has been revised to note that most of the temporary changes to the DCTC and DCAP rules that were provided as COVID-related relief are no longer available, and to delete references to those changes. It also references prior guidance under which DCAPs could be amended to allow unused amounts from 2021 to carry over to 2022. 

Source: Thomson Reuters

IRS issues 2022 version of publications 502 and 503 for medical and dependent care expenses

IRS issues final versions of Publication 15 and 15-T for 2023

The IRS has issued the final versions of Publication 15 (Circular E, Employer’s Tax Guide) and Publication 15-T (Federal Income Tax Withholding Methods) for use in the 2023 tax year.

Publication 15: This publication explains the tax responsibilities as an employer regarding the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. The publication also explains the forms an employer must give to its employees, those employees must provide, and those the employer must send to the IRS and the Social Security Administration (SSA).

Publication 15-T: Publication 15-T supplements Publication 15 and Publication 51 (Agricultural Employer’s Tax Guide). It describes how to figure withholdings using the wage bracket method or percentage method.

Qualified sick/family leave in 2023: Publication 15 notes that the rate of Social Security tax on taxable wages, including qualified sick leave wages and qualified family leave wages paid in 2023 for leave taken between March 31, 2021 – October 1, 2021, is 6.2% each for the employer and employee or 12.4% for both.

However, qualified sick leave wages and qualified family leave wages paid in 2023 for leave taken between March 31, 2020 -April 1, 2021, are not subject to the employer share of Social Security tax; therefore, the tax rate on these wages is 6.2%. The 2023 Social Security wage base limit is $160,200.

Payroll research tax credit: For tax years beginning before January 1, 2023, a qualified small business may elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit. The Inflation Reduction Act of 2022 (the IRA) increased the election amount to $500,000 for tax years beginning after December 31, 2022.

The election and determination of the credit amount that will be used against the employer’s payroll taxes are made on Form 6765 (Credit for Increasing Research Activities). The amount from Form 6765, line 44, must then be reported on Form 8974 (Qualified Small Business Payroll Tax Credit for Increasing Research Activities).

Starting in the first quarter of 2023, the payroll tax credit is first used to reduce the employer share of Social Security tax up to $250,000 per quarter and any remaining credit reduces the employer share of Medicare tax for the quarter (any remaining credit is carried forward to the next quarter).

Forms and publications discontinued forms after 2023: Form 941-SS (Employer’s Quarterly Federal Tax Return) and Publications 80 and 179.

Source: Thomson Reuters

IRS issues 2022 version of publications 502 and 503 for medical and dependent care expenses

3 ways to access HRA funds

As many know, a Health Reimbursement Arrangement (HRA) is an employer-funded account that helps pay for a medical plan’s deductible and co-insurance expenses. There are three ways to access an HRA. Here they are as follows.

  1. Filing an electronic claim: this can be submitted by signing into your NueSynergy account.
  2. Filing a paper claim: a paper claim along with a copy of Explanation of Benefits (EOB) can be emailed to NueSnergy. A paper claim can be obtained by signing into your NueSynergy account or by calling NueSynergy’s customer service team (855-890-7239).
  3. Providing documentation: A copy of your EOB from your insurance company is required to approve any claim for reimbursement.

For more information on accessing HRA funds and about this account in general, check out this handout.

IRS issues 2022 version of publications 502 and 503 for medical and dependent care expenses

What employers should know about HRAs

Two months ago, NueSynergy wrote about several Health Reimbursement Arrangement (HRA) FAQs to keep in mind. Now, taking it a step further, NueSynergy will discuss what employers, specifically, should look for in regard to an HRA. Here it is as follows:

An HRA can be paired with any health plan with no limitations

This means that high-deductible health plans (HDHPs) are not required in order to offer this account.

What happens to the funds if my employee leaves the company?

HRA funds are not portable. Therefore, if any funds become unused then any remaining amount returns to you (employer).

An employer can only contribute funds to an HRA

This also means that owners and partners cannot participate in this account. Per IRS guidelines, anyone with two percent or more ownership in a schedule S corporation, LLC, LLP, sole proprietorship, or partnership may not participate. If you would like to provide an opportunity for your employee to save for additional medical expenses tax-free, then suggest them to enroll in a Flexible Spending Account (FSA).

As an employer, can I choose proration for new hires and family status change?

Yes. You can prorate contributions as long as it occurs throughout the year.

When does an HRA begin paying for an employee’s expenses?

An employer can either allow an HRA to pay before the employee meets any deductible, or it can be set up so that the employee has to meet a certain amount of out-of-pocket expenses before the HRA begins to pay.

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