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For many people, health savings accounts (HSAs) offer a tax-friendly way to pay medical bills. You can deduct your contributions to an HSA (even if you don’t itemize), contributions made by your employer are excluded from gross income, earnings are tax free and distributions aren’t taxed if you use them to pay qualified medical expenses. Plus, you can hold on to the account past your working years and use it tax-free for medical expenses in retirement. All-in-all, HSAs can be a great tool for covering your health care costs.

There are, however, a few HSA limitations and requirements that are adjusted for inflation each year. They apply to the minimum deductible for your health insurance plan, your annual out-of-pocket expenses and the amount you can contribute to an HSA for the year. If you’re not in compliance with the restrictions in place for any particular year, then you can say goodbye to the HSA tax savings for that year.

To contribute to an HSA, you must be covered under a high deductible health plan. For 2020, the health plan must have a deductible of at least $1,400 for self-only coverage ($1,350 for 2019) or $2,800 for family coverage ($2,700 for 2019).

The health plan must also have a limit on out-of-pocket medical expenses that you are required to pay. Out-of-pocket expenses include deductibles, copayments and other amounts, but don’t include premiums. For 2020, the out-of-pocket limit for self-only coverage is $6,900 ($6,750 for 2019) or $13,800 for family coverage ($13,500 in 2019). According to the IRS, only deductibles and expenses for services within the health plan’s network should be used to determine if the limit applies. Finally, your contributions to an HSA are limited each year, too. You can contribute up to $3,550 in 2020 if you have self-only coverage or up to $7,100 for family coverage ($3,500 and $7,000, respectively, for 2019). If you’re 55 or older at the end of the year, you can contribute an extra $1,000 in 2020 (same as in 2019). However, your contribution limit is reduced by the amount of any contributions made by your employer that are excludable from your income, including amounts contributed to your HSA account through a cafeteria plan.

Need tax help? Call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Taxpayers may need to take money out of their individual retirement account or retirement plan early. However, this can trigger an additional tax on top of other income tax they may owe. Here are a few key things for taxpayers to know:

• Early Withdrawals. An early withdrawal normally is taking cash out of a retirement plan before the taxpayer is 59½ years old.  
• Additional Tax. The IRS charges a 10 percent penalty on early withdrawals from most qualified retirement plans. There are some exceptions to this rule.
• Nontaxable Withdrawals. The additional tax does not apply to nontaxable withdrawals. These include withdrawals of contributions that taxpayers paid tax on before they put them into the retirement plan.
• Rollovers are a nontaxable withdrawal. A rollover happens when taxpayers take cash or other assets from one retirement plan and put the money in another plan within 60 days. A rollover can also happen when they direct their plan administrator to make the payment directly to another retirement plan or to an IRA.
• Form 5329. Taxpayers who took an early withdrawal last year may have to file Form 5329 with their federal tax return. 

If you need tax help please call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

It’s almost here…the filing deadline for taxpayers who requested an extension to file their 2018 tax return. This year’s deadline is Tuesday, October 15.

Even though time before the extension deadline is dwindling, there’s still time for taxpayers to file a complete and accurate return. Taxpayers should remember they don’t have to wait until October 15 to file. They can file whenever they are ready.

Taxpayers who did not request an extension and have yet to file a 2018 tax return can generally avoid additional penalties and interest by filing the return as soon as possible and paying the amount owed.

Here are a few tips and reminders for taxpayers who have not yet filed:

Use IRS Free File or other electronic filing options.

Taxpayers can file their tax return electronically for free through IRS Free File. The program is available on IRS.gov through Oct. 15. Filing electronically is easy, safe and the most accurate way to file taxes. Other electronic filing options include using a free tax return preparation site, commercial software or an authorized e-file provider.

Taxpayers getting a refund should use Direct Deposit.

The fastest way for taxpayers to get their refund is to file electronically and use direct deposit.

There are online payment options.

Taxpayers with extensions should file their tax returns by Oct. 15 and, if they owe, pay as much as possible to reduce interest and penalties. IRS Direct Pay allows individuals to securely pay from their checking or savings accounts. These taxpayers can consider a payment plan, which allows them to pay over time. For other payment options, taxpayers can visit the Paying Your Taxes page on IRS.gov.

There’s more time for the military.

Military members and those serving in a combat zone generally get more time to file. These taxpayers usually have until at least 180 days after they leave the combat zone to file returns and pay any taxes due.

There’s also more time in certain disaster areas.

People who have a valid extension and are in – or affected by – a federally-declared disaster may be allowed more time to file.

Keep a copy of tax return.

Taxpayers should keep a copy of their tax return and all supporting documents for at least three years.

Taxpayers can view their account information.

Individual taxpayers can go to IRS.gov/account and login to:

• View their balance.
• See their payment history.
• Pay their taxes.
• Access tax records through Get Transcript.

Before setting up an account, taxpayers should review Secure Access: How to Register for Certain Online Self-Help Tools to make sure they have the info needed to verify their identities.

If you haven’t filed your 2018 tax return and you need help, Call us:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Disasters can strike without warning, causing damage and destruction. Before the IRS can authorize tax relief, the president must declare a federal disaster. Here’s a rundown of tax-related things that usually happen after a disaster:

The IRS gives taxpayers more time to file and pay.
Taxpayers located in a disaster area may have extra time to file returns and pay taxes. The IRS’s Twitter account and disaster assistance page provide disaster updates and links to resources. Taxpayers can also call the IRS’s disaster line at 866-532-5227. 

Taxpayers can qualify for a casualty loss tax deduction.
People who have damaged or lost property due to a federally declared disaster may qualify to claim a casualty loss deduction. They can claim this on their current or prior-year tax return. This may result in a larger refund. The IRS will quickly process these returns. 

People can file for a disaster loan or grant.
The Small Business Administration offers financial help to business owners, homeowners and renters. This help is for those in a federally declared disaster area. To qualify, a taxpayer must have filed all required tax returns. 

Taxpayers might need a tax return transcript.
People affected by a disaster can get copies or transcripts of past tax returns for free by submitting one of two forms. These are Form 4506, Request for Copy of Tax Return, and Form 4506-T, Request for Transcript of Tax Return. The taxpayer should state on the form the request is related to a disaster. They should also list the state and type of event. This whelps speed up the process.

People should submit a change of address.
After a disaster, people might need to temporarily relocate. Those who move should notify the IRS know about their new address by submitting Form 8822, Change of Address. 

The IRS encourages affected taxpayers to review all federal disaster relief by visiting disasterassistance.gov. 

For help with Disaster relief or any other tax question, call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Keeping full and accurate homeowner records is not only vital for claiming deductions on your tax return, but also for determining the basis or adjusted basis of your home. These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. You should also keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis.

Here are a few examples:

• Putting an addition on your home
• Replacing an entire roof
• Paving your driveway
• Installing central air conditioning
• Rewiring your home
• Assessments for local improvements
• Amounts spent to restore damaged property

In addition, you should keep track of any decreases to the basis such as:

• Insurance or other reimbursement for casualty losses
• Deductible casualty loss not covered by insurance
• Payment received for easement or right-of-way granted
• Value of subsidy for energy conservation measure excluded from income
• Depreciation deduction if home is used for business or rental purposes

How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. You must also keep these records for as long as they are important for the federal tax law.

Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. A period of limitations is the limited period of time after which no legal action can be brought.

For assessment of tax, the period of limitations is generally three years from the date you filed the return. When filing a claim for credit or refund, the period of limitations is generally three years from the date you filed the original return or two years from the date you paid the tax, whichever is later. Returns filed before the due date are treated as filed on the due date.

You may need to keep records relating to the basis of property longer than the period of limitations. For example, basis is needed to determine gain on home sale. Any gain on sale of a home is tax-exempt for amounts up to $250,000 ($500,000 for married couples). Basis is also important in figuring casualty loss, on conversion of the home to business use, or where there’s a gift of the home (in this case, it is important to the donee). You should keep these records for as long as needed because they are important in figuring the basis of the property. Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you.

If you have any questions as to what items are to be considered in determining basis, don’t hesitate to call.

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600