Don't Miss Out: Get To Know Your Flexible Spending Account

What is a Flexible Spending Account?

A Flexible Spending Account, or FSA, is an incredibly useful benefit that can offer you significant tax savings and help you pay for eligible medical expenses. With an FSA, you can set aside money from your paycheck before taxes are calculated, so that you can use the funds to cover healthcare costs. In this article, we'll cover all the essentials of the FSA account and how you can make the most of it.

How Does an FSA Work?

A Flexible Spending Account (FSA) is a great way to set aside pre-tax money for eligible medical and dependent care expenses. It’s a powerful way to cover the out-of-pocket costs associated with healthcare, and it’s a valuable part of any employee benefits package. But what exactly is an FSA and how does it work?

When you enroll in an FSA, you decide how much money you would like to allocate to your account. Your contributions are deducted from your paychecks on a pre-tax basis and deposited into the account. This means that you don't have to pay federal, state, or other taxes on the money that you allocate to the FSA. It’s important to note, however, that some state or local taxes may still apply.

Once the money is in your account, you can use it to pay for a variety of different healthcare-related expenses. These could include things like doctor visits, prescription medications, vision and hearing aids, dental procedures, and medical equipment. FSA funds can also be used for dependent care expenses, such as daycare or other care for children, aging parents, or a disabled dependent.

When it comes time to make a purchase, simply pay with an FSA debit card or provide an itemized receipt to your FSA provider. Your provider will process the expense and pay the provider directly. It’s important to note that FSA funds are typically only available on an as-needed basis and do not roll over from year to year. Any money remaining in your account at the end of the plan year will be forfeited.

An FSA is a great way to save money on many of the out-of-pocket expenses associated with healthcare. It’s important to educate yourself on the rules and regulations of the account to ensure that you’re taking full advantage of all the benefits that come with it.

Contributions and Eligibility

A Flexible Spending Account (FSA) is a great way to save money on eligible medical and dependent care expenses. To participate in an FSA, you must contribute money on a pre-tax basis to the account. Eligibility can depend on your employer, so make sure you understand the details of the plan before signing up. Generally speaking, most employees are eligible to contribute the maximum amount set by the IRS, which is currently $3,050 (tax year 2023) per person. If you’re married, you and your spouse can both contribute to an account and double your savings. Depending on your employer, you may also be able to contribute to a Dependent Care FSA or Health Care FSA, which can be used to pay for childcare or medical-related expenses, respectively.

Flexible Spending Account Rules

Flexible Spending Accounts (FSAs) are valuable tools that allow individuals to set aside a portion of their pre-tax income for healthcare and childcare expenses. To ensure that FSAs are used for their intended purpose, there are certain rules and regulations that must be followed.

The Internal Revenue Service (IRS) has established guidelines for how much money can be set aside into each type of FSA account. For example, the maximum contribution for a Healthcare FSA is $3,050 (Tax Year 2023), while the maximum contribution for a Dependent Care FSA is $5,000.  Additionally, FSA funds must be used within the calendar year they are set aside, with any unused funds reverting back to the individual’s employer at the end of the year.

It’s important to understand the rules and regulations associated with FSAs so that you don’t miss out on this valuable benefit. Knowing the rules can help you maximize the use of your pre-tax income and ensure that you are taking advantage of all of the benefits offered by an FSA. 

Benefits of an FSA

A Flexible Spending Account (FSA) is a valuable tool that can help you save money and make the most of your benefits. It provides an easy way to set aside pre-tax dollars to pay for eligible medical, dependent care, and transit expenses. The main benefit of an FSA is that it allows you to save money by reducing your taxable income each year. This can result in significant savings, particularly for taxpayers in high tax brackets. 

In addition to tax savings, FSAs offer convenience and flexibility. You can easily use your account to pay for eligible expenses, such as copayments or deductibles for health insurance plans, or care for dependents like children or elderly parents. You can also use the funds to pay for parking and mass transit expenses. And you can use your FSA debit card to cover the cost of prescriptions or over-the-counter medications. 

An FSA also offers protection from unexpected medical expenses. With an FSA, you can set aside funds each year to be used for medical expenses that you would otherwise have paid out of pocket. This benefit can provide peace of mind knowing you have a reserve of funds available if a medical emergency arises. 

Finally, with an FSA, you have the added advantage of knowing that you are making the most of your employer's benefits. By taking full advantage of the benefits offered by an FSA you are helping to ensure that you are getting the most from your employer's benefits package. 

In conclusion, a Flexible Spending Account offers many benefits that make it an excellent tool for saving money and making the most of your employer's benefits. The tax savings, flexibility, convenience, and protection it offers make it an invaluable part of any benefits package.

Tax Savings

A Flexible Spending Account (FSA) is an incredibly beneficial way to save on taxes while still covering health care expenses. With an FSA, you can set aside a portion of your pre-tax income to pay for out-of-pocket medical expenses. Not only does this reduce the amount of taxes you owe, but it also allows you to manage your health-care related costs without draining your bank account. That’s because the money you set aside in the account is deducted from your pay before taxes, which means you will owe less in taxes. With an FSA, you can save up to 40 percent of your total health care costs. Additionally, you may be able to use the money in your FSA to pay for vision care, prescription medications, and over-the-counter medications. So don't miss out on the potential savings offered by an FSA. Get to know your options and start taking advantage of this valuable tax savings now.

Medical Expenses Covered by an FSA

Under a Flexible Spending Account (FSA) plan, your eligible medical expenses can be paid for with pre-tax dollars. This can save you money and make necessary medical care more affordable. Eligible medical expenses can include doctor visits, hospital stays, prescription medications, vision exams, and eyewear, to name a few. An FSA plan also covers preventative care, such as check-ups and immunizations. Other medical expenses that may be covered include mental health services, home health care, and medical equipment like crutches, wheelchairs, and hearing aids. Before you sign up for an FSA plan, check to make sure the medical expenses that you plan on using are eligible for reimbursement.

FSA Account Management 

Managing your Flexible Spending Account (FSA) is a crucial part of ensuring you are getting the maximum benefit from it. By properly managing your FSA, you can reduce your overall healthcare costs and better utilize the funds you have set aside for medical expenses. Here are a few things to consider when managing your FSA account. 

First, it is important to be mindful of the “Use-Or-Lose” rule. This rule states that if you do not use all of your FSA funds by the end of the plan year, you will lose the remainder. To ensure that you are correctly utilizing your funds, create a budget for yourself as soon as you receive your FSA funds. Utilize this budget to prioritize and accurately allocate your FSA funds. Additionally, it is important to track your spending throughout the year, so you know exactly how much of your money is left and where it is being spent. 

Another important aspect of managing your FSA account is to make sure you only use the funds for qualified medical expenses. The IRS has a list of qualified medical expenses that you can use your FSA funds for. If you are unsure if a particular medical expense is qualified, check with your FSA administrator or the IRS to get clarification. It is important to remember that if you use your FSA funds for non-qualified expenses, you will have to pay taxes and a penalty. 

Finally, it is important to be aware of the IRS documentation rules. Generally, the documentation of your medical expenses must include an itemized statement from your provider, the date of service, the amount of the expense, and the type of service. If you do not have the necessary documentation, you may be required to pay back the amount to your FSA.

Managing your FSA account can seem daunting but being aware of these key points can help you stay on track and make sure you are getting the most out of your FSA funds.

Eligibility and Enrollment 

Understanding eligibility and enrollment for a Flexible Spending Account (FSA) is essential for taking full advantage of its benefits. Generally, employees of employers who offer FSAs are eligible to enroll. If your employer does offer an FSA, you may need to enroll during open enrollment. However, there may be other times when you can enroll, including during a qualifying life event or when you have a change in your employment status. 

Once you complete enrollment, you will typically have a grace period to submit claims for the current year and should make plan changes, if necessary. If you have any questions regarding eligibility or enrollment, be sure to contact your employer or the benefits administrator.

Claims and Reimbursements 

When it comes to your Flexible Spending Account (FSA), your claims and reimbursements are an important detail to understand. With an FSA, you can set aside pre-tax money to cover eligible medical and dental expenses, making it a great way to save. When you submit a claim, you'll typically have to provide a receipt and other proof of your eligible purchase. Once it's been approved, you'll get your reimbursement either in the form of a check or direct deposit. In some cases, you may also be able to use a debit card to pay for expenses that are usually reimbursed through your FSA. It's important to read your FSA plan carefully so that you understand the claims and reimbursement process and know what type of paperwork needs to be submitted.

Managing Your FSA Funds

Managing your Flexible Spending Account (FSA) is a great way to make the most of the funds you set aside each year. It’s important to understand the rules that come along with these accounts, such as the “use it or lose it” rule, which means that any unused funds at the end of the plan year are forfeited. It’s also important to understand the fees associated with the plans, as well as the specific types of medical expenses that can be purchased with your FSA funds. Knowing the ins and outs of FSA accounts can help you better manage your money and ensure you are making the most of your funds.

Contact Surya Padhi at Sure Financials for any question and clarification. Surya Padhi is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals National Association of Tax Professionals (NATP) and  New Homepage - National Association of Enrolled Agents (naea.org). Visit Welcome | Sure Financials & Tax Services, LLC (surefintaxsvs.com) for more information and contact us by calling +1908.300.9193.

Moving Beyond Tax Season: What To Do Now

Introduction

Tax season can be a stressful time of year for everyone, but now that you’ve filed your return, it’s time to move on and focus on ways to manage your finances year-round. With the right strategies in place, you can make sure that you’re in a good financial position going forward. In this article, we will discuss some key steps you should take to get organized and make the most of your money now that the tax season is over. We’ll discuss strategies such as understanding your tax situation, organizing your documents, creating an emergency fund, taking advantage of tax breaks and more. Read on to find out how to move beyond tax season and start taking control of your finances.

Understanding Your Tax Situation

Now that tax season is winding down, it’s important to understand your tax situation and what steps you may need to take to maximize your deductions and minimize your total tax liability. Knowing your current tax situation, combined with understanding the guidelines for proper filing and deductions, will help you get the most out of filing your return and help you plan for the future.

Start by gathering all of your tax documents from the year, including W-2s, 1099s, and other forms. Ensure all of your documents are up-to-date and accurate, and if you have any questions or discrepancies, contact the IRS right away. You’ll also want to double check the filing status you’re going to use for the year. There are several filing statuses available, so it’s important to make sure you’re using the correct one for your situation.

Once you’ve gathered your documents and verified your filing status, take a look at your deductions. Make sure you are taking advantage of every deduction you’re entitled to, from charitable contributions to educational expenses and more. For 2019, the standard deduction was increased to $12,200 for singles and $24,400 for married filing jointly, so compare that to the total of your itemized deductions to determine which route is more beneficial for you.

You’ll also want to understand the tax credits available. Tax credits are different from deductions in so far as they are a dollar-for-dollar reduction in your total tax liability, while deductions are a reduction of your taxable income. However, not all tax credits are refundable, meaning they can only be applied against your total tax liability to reduce it to $0, whereas a refundable tax credit can be taken in excess of what you owe and the balance is issued to you as a refund.

Finally, familiarize yourself with the different tax payment options available. You can pay taxes via electronic payment, such as through your bank or through a payment processor like PayPal or Venmo. You can also pay by check or money order, or even in cash if you visit a local IRS office. Knowing the available payment options can help you plan and make sure you pay your taxes on time.

Organize Your Documents

After the hustle and bustle of tax season has come to a close, many people may be feeling a bit at a loss as to what to do with their documents and paperwork. Keeping your files organized may not be the most glamorous task, but it can save you a great deal of time and frustration — not to mention money — down the road. Here is a comprehensive list of steps that you can take to organize your documents and keep track of important information year-round.

First, determine how you want to store documents. The method you choose will largely depend on the volume of paperwork that you have to store. You can organize documents in physical storage such as filing cabinets or storage bins, or you can go digital and utilize digital filing systems. Whichever option you choose, make sure that you have easy access to any important papers or documents.

Second, find a way to centralize your documents. This could be an email folder or shared Google Drive, a filing cabinet or storage bin, or designated folders on your computer. This will make it easier to keep track of paperwork and quickly access the documents you need when you need them.

Third, come up with a filing system that works for you. This could be a traditional system of alphabetical filing, color coding, or a categorization system of your own design. If you’re new to document organization, start small. Use the basics to find what works for you and then expand from there.

Fourth, label everything clearly and include any relevant dates. Labels will help you quickly identify the contents of each file or folder and will prevent mix-ups or confusion. Dates can be especially useful for tax-related documents and any documents that are time-sensitive.

Finally, make sure to shred any documents that you don't need. Add a regular shredding day to your calendar and make sure to commit to it. This will help you reduce clutter and keep your documents secure.

Organizing documents may not seem like the most exciting task, but it can save you time and valuable resources in the long run. With a little bit of effort, you can keep your documents organized and easily accessible throughout the year.

Review Your Tax Forms

Now that tax season is over, it's time to review your tax forms and make sure everything looks accurate. This is a critical part of the tax process and can help you avoid costly errors or penalties in the future. Here are some steps you can take to review your tax forms and make sure you're in good standing with the IRS.

1. Review All Tax Forms Received – Start by reviewing all the forms that the IRS sent you. Double check the information on each form and verify that it matches the information on your income tax return. Make sure to double check that all wage and other income information is accurate and for the most recent tax year.

2. Check Tax Deductions – If you claimed any deductions, you must make sure that you have the proof to back them up. This is especially important if you are using a deduction you haven't used before. Check your supporting documents and make sure they are accurate.

3. Review Tax Credits – Tax credits are a great way to reduce your tax bill. However, you must be sure that the credits you claimed are valid and that they match the information on your return. Verify that the credits you claimed are accurate and that you have proof of any expenses related to the credits.

4. File Amended Returns If Necessary – If you find any errors on your return, you may need to file an amended return. You can file an amended return online via the IRS website. Make sure to include supporting documents and any other paperwork that may be necessary.

By taking the time to review your tax forms, you can be sure that you don't have any errors that could lead to costly penalties or audit. If you find any discrepancies or errors, take the appropriate steps to correct them to avoid further complications.

Managing Your Finances Year-Round

It can be easy to get through life feeling like you have your finances figured out. You pay your bills on time, you have a steady salary, and you can manage your taxes every year. But one of the key elements of financial success is to consistently check in with your finances throughout the year. Whether it is setting money aside each month or planning out a budget to keep you on track, having a good understanding of where you stand financially is key to success.

Just because tax season ends doesn’t mean you can forget about your finances. As soon as tax season is over, start thinking about how you can manage your finances year-round. When it comes to managing your finances, here are a few tips that you can use to get started:

1. Take Stock: The first thing you should do is evaluate your current financial situation. Where do you stand? Are you in a good place or is there room for improvement? This is the perfect time to review your income and expenses and create a budget so you can see where your money is going each month.

2. Create Savings Goals: After you have taken stock of your financial situation, it’s time to establish some savings goals. Think about the long-term financial goals that you have like saving for retirement, saving for a home, or saving for a big purchase. Establishing these goals will help you stay focused and motivated to save throughout the year.

3. Automate Your Savings: Once you have established your goals, it’s important to automate your savings. This will save you time and energy each month, allowing you to stay on top of your savings goals without having to constantly remind yourself. Automated savings can also help you boost your savings by setting aside a certain amount of money each month.

4. Track Your Progress: The key to financial success is to stay on top of your progress. Make sure to review your budget and savings goals on a regular basis. This will help you stay on track and make sure you are making progress towards your goals.

5. Get Professional Help: If you are feeling overwhelmed with managing your finances, it may be helpful to seek professional help. Certified financial advisors can help you create a plan that works for your unique situation and provide guidance and support throughout the year.

Assess Your Budget

Now that the tax season has come to a close, it's an ideal time to take stock of your budget. Regardless of whether you're in the midst of a financial crisis or are simply looking to ensure your future stability, a careful review of your expenses and income can help you identify areas of strength, as well as opportunities for improvement.

A good place to start when assessing your budget is to review your income sources. Start by listing all of your sources of income, such as wages, investments, benefits, or government assistance. This is a crucial step, as it helps to ensure that you are maximizing the potential of all income opportunities.

Once you have identified your income sources, it's time to take a look at your expenses. Start by writing down all of your regular expenses-- rent, utilities, groceries, and so on. Once you have a complete list of your fixed expenses, add up the total and consider what percentage of your total income these expenses take up each month.

Once you have an understanding of your fixed expenses, it's time to take a look at your discretionary spending. Start by listing out all of the items that you purchase each month that are not necessary for your survival, such as streaming subscriptions or dining out. These expenses can quickly add up and should be considered when assessing your budget.

Once you have completed your assessment, the next step is to evaluate and adjust your spending. Consider what areas can be reduced or eliminated, and if possible, try to limit unnecessary purchases. Finally, look for potential areas of savings, such as reducing your utility bills or renegotiating your rent.

By taking a few moments to assess your budget, you can create a better understanding of your finances, identify potential areas of improvement, and ensure that you are properly managing your money.

Make Retirement Contributions

When it comes to retirement planning, one of the most important things you can do is make retirement contributions. With the tax season behind us, now is the perfect time to get started on setting up your retirement plan and preparing for the future.

Making retirement contributions can be done in a variety of ways, such as through employer-sponsored 401(k)s, Individual Retirement Accounts (IRAs), and Roth IRAs. With all of these options, there are different rules and tax benefits to consider, so it's important to understand the differences between each of these types of retirement accounts.

401(k)s are offered by employers and contributions to them are made on a pre-tax basis, meaning that your contribution to the account is not subject to federal income tax. Any contribution you make to your 401(k) is partially matched by your employer, usually up to a certain percentage. It's important to note that contributions to a 401(k) are limited by IRS contribution limits. However, these contribution limits increase each year, and the 2020 contribution limit is $19,500 ($26,000 for those 50 and over).

IRAs are an individual retirement account that you open on your own. With an IRA, you can contribute up to $6,000 each year ($7,000 for those 50 and over) without being subject to tax. There are both Traditional and Roth IRA options, with the former contributing pre-tax and the latter post-tax. Contributions to Roth IRAs are not tax deductible, but earnings from them are tax-free when withdrawn in retirement.

When considering retirement contributions, it's important to understand the rules for each type of account and the different tax benefits associated with each. It's also important to consider your overall financial situation and how much money you can afford to set aside each month. While it may seem daunting to start planning for retirement, taking the initiative now to make retirement contributions will help set you up for a more secure financial future.

Create an Emergency Fund

After you have completed your taxes and received your return, it can be tempting to splurge and reward yourself for all the hard work. But it’s important to remember that while your tax return can help you pay off some debts, you should also be thinking about creating a secure financial future. One of the most crucial steps in ensuring financial security is creating an emergency fund.

An emergency fund is a financial safety net that everyone should have in place. It’s a reserve of funds that you can use in the case of unexpected expenses. These can include medical bills, home repairs, or job loss. The amount you should keep in your emergency fund can vary, but it is generally recommended that you have 3-6 months’ of living expenses saved up.

Creating and funding your emergency fund should be a priority, even if you are trying to pay off debt or save for retirement. It’s important to remember that you can’t predict the future, so it’s better to be prepared for the unexpected.

Here are some tips for creating and maintaining an emergency fund:

• Start small. Start with whatever amount you can manage and make sure to keep saving as you move down your other financial goals.

• Consider automating your saving. This can be done through a direct deposit, an automatic transfer, or a digital savings platform.

• Look at cutting back on spending. Evaluate any unnecessary expenses and think about if you can reduce spending in certain areas.

• Use windfalls wisely. If you receive any tax refunds, bonuses, or other income, consider adding this money to your emergency fund.

Creating an emergency fund is one of the most important steps you can take toward financial security. Even though it may be a bit intimidating to start, it will be worth it in the end to know that you have a reserve for any unexpected costs and can protect yourself against financial hardship.

Maximizing Money-Saving Strategies

Now that tax season has come and gone, it's time to start thinking about ways to maximize your money-saving strategies. Although it can be tempting to wait until the last minute to file taxes, it's important to be proactive in planning ahead. Doing so can help you maximize tax deductions, manage your money more efficiently, and create a sound financial plan that can help you reach your money-saving goals.

The first step in maximizing your money-saving strategies is to determine how much you need to save. Consider your current income and debts, as well as any future sources of income, and use this information to create a budget. This budget should focus on setting priorities, such as essential household expenses and lifestyle expenses. Once you have a budget in place, it's time to start exploring the different money-saving strategies you can use to reach your goals.

To start, consider exploring the different tax deductions you may qualify for. Every year, the IRS releases new tax deductions, such as deductions for home office expenses, charitable donations, and education expenses. Taking advantage of these deductions can help you save significant amounts of money. Additionally, if you're looking to save money on taxes, it's important to understand the tax planning options available to you. Consulting with a financial advisor or tax professional can help you better understand the different tax planning strategies and determine which one is best suited for your particular situation.

In addition to tax deductions, there are several other money-saving strategies you can use to maximize your savings. Consider taking advantage of cash back rewards and loyalty programs when making purchases. These programs can offer you points, discounts, or cash back on making certain purchases. Additionally, many banks and credit cards offer rewards programs that can offer you cash back on everyday purchases.

Finally, consider exploring ways to save on energy bills. Installing energy-efficient appliances, using LED lightbulbs, and unplugging idle appliances can all help you save money on energy costs. Additionally, many utility companies offer incentives to customers who switch to renewable energy sources.

By taking the time to plan ahead and explore different money-saving strategies, you can maximize your savings and reach your financial goals.

Take Advantage of Tax Breaks

Tax season may be over but there are still steps you can take to take advantage of all the tax breaks available to you. Now is the time to look for ways to maximize your tax deductions and credits to help reduce your tax bill. Whether you're an individual or a business, there are a variety of tax breaks that may be available.

For individuals, some of the most common tax breaks are deductions, credits, and exemptions. Deductions reduce your taxable income, while credits reduce the amount of tax you owe. Exemptions are an amount of income that is not subject to tax. Additionally, there are a variety of credits available such as the Earned Income Tax Credit, the Child and Dependent Care Credit, and the Saver's Credit.

To take advantage of deductions, you'll need to get familiar with the various tax rules for itemizing. This involves listing various expenses and subtracting the total from your earned income. Common deductions include charitable donations, medical expenses, and home mortgage interest.

Businesses may be able to take advantage of several different tax credits and deductions. Depending on the type of business you own, you may be eligible for credits such as the Work Opportunity Tax Credit, the Research and Development Tax Credit, and the Small Business Health Care Tax Credit. Businesses may also be able to deduct certain business expenses, such as business travel and promotional expenses.

In addition to the more traditional tax breaks, there are other strategies you can use to reduce taxes such as harvesting capital losses and deferring income. Harvesting capital losses involves selling stocks at a lower price than when you initially purchased, which can reduce your taxable income. Deferring income involves delaying the receipt of income until the following year, which can help you lower your current-year taxes.

By taking advantage of the various tax breaks available, you can reduce your tax burden and maximize your financial wellbeing. Make sure to consult a tax professional to ensure you're taking full advantage of all the tax savings available to you.

Consolidate Debt

Tax season is over. You’ve gotten your taxes done, filed, and are now ready to move beyond the numbers game of personal finance and get a better handle on your debt. There’s a lot of different approaches you can take when it comes to managing debt, but consolidating it is one way to put the power in your hands and simplify the process.

When you consolidate debt, you’re taking multiple debts and combining them into one loan. This has a lot of advantages, including the ability to combine multiple debts with high interest rates into one loan with a fixed interest rate, often lower than the original rate of the debt. This can save you from a lot of interest rate and penalties and help you manage your debt in the long term.

So, how do you go about consolidating debt? You’ll first want to decide what type of loan you want. There are several options when it comes to consolidating debt, including personal loans, home equity loans, and balance transfer credit cards. Each of these methods has its own pros and cons and may be more or less suitable for your situation.

You’ll then want to investigate the various lenders who offer debt consolidation loans. It’s important to compare interest rates and fees, as these can have a big impact on your payment plan. Once you’ve picked a lender, you’ll need to submit an application. If your credit is good, then you’ll likely get approved quickly and you can begin the process of consolidating your debt into a single loan.

It’s also important to remember that consolidating debt isn’t a magic pill, and it won’t make your debt disappear. It’s a tool that can help you better manage your debt and make more affordable payments over time, but you’ll still need to be disciplined in order to stay on top of your payments and keep your debts in check.

Moving beyond tax season and consolidating your debt is an important step towards financial freedom. Take the time to research your options and find the best solution for your situation. Doing so will help you stay on top of your debt and take control of your financial future.

Research Benefits and Credits

As the tax season comes to a close, it’s important to be proactive and consider the various tax benefits and credits you may be eligible to receive. Tax credits and benefits can often help lower your tax burden and maximize your tax deductions. Luckily, there are a few key steps you can take to ensure you get the most out of them.

First, research the various tax credits and benefits you are eligible to receive. The IRS website is a great place to start, as they provide helpful information to taxpayers in order to help them identify available credits and benefits as well as the requirements to meet them. Additionally, many states also offer their own credits and benefits, so be sure to research any applicable credits in your area and what you need to do to qualify.

Second, ensure you’re meeting all the necessary requirements for any tax credit or benefit you apply for. Different credits and benefits may have different requirements, so it’s important to familiarize yourself with the specifics of each. Be sure to double check that you are meeting all the requirements or else you may miss out on credits or benefits you’re otherwise eligible to receive.

Third, take the time to maximize any eligible credits or deductions. There are often limits on the amount of certain deductions and credits for which you can qualify, so it’s important to maximize these as much as possible. Furthermore, certain credits and deductions may have time limits, so be sure to be aware of these deadlines and get your paperwork in on time.

Finally, check in regularly with your tax professional. Meeting with a qualified tax professional can help greatly in understanding the taxing process, as well as identifying and maximizing available credits and deductions. Furthermore, your tax professional can help you develop a tax strategy for the coming year, as well as manage any tax-related benefits or credits you may be eligible for.

When it comes to tax credits and benefits, knowledge is key. Taking the time to research and understand your eligibility, as well as ensuring you meet all necessary requirements, is essential in order to make sure you’re getting the most out of your tax return.

Conclusion

Tax season is an important time of year for all individuals. But it should not be our only focus for financial planning. By taking the time to organize our documents and understand our tax situation, we can manage our finances year-round and ensure that our income is maximized. Through retirement contributions, emergency funds, and money-saving strategies, we can protect ourselves against future financial uncertainty. Additionally, we should take advantage of tax breaks and credits in order to consolidate debt and minimize our financial burden. By being proactive, we can move beyond tax season and plan for a stronger financial future.

 

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Taxpayers should review the 401(k) and IRA limit increases for 2023

Issue Number:  Tax Tip 2022-178

The amount individuals can contribute to their 401(k) plans in 2023 will increase to $22,500 -- up from $20,500 for 2022. The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver's Credit will also all increase for 2023.

Taxpayers can read the technical guidance regarding all of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023 in Notice 2022-55 on IRS.gov.

Here are some of the changes for 2023:

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $22,500.
• The limit on annual contributions to an IRA will increase to $6,500. The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
• The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $7,500.
• The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans will increase to $3,500, up from $3,000.
• The phase‑out ranges for deducting contributions to a traditional IRA will also increase. Taxpayers should review Notice 2022-55 regarding the details for their situation.
• The income phase-out range for people making contributions to a Roth IRA will increase for taxpayers filing as single, head of household and married filing jointly. Again, taxpayers should consult Notice 2022-55 for specifics about their situation.
• The income limit for the Saver's Credit for low- and moderate-income workers is $73,000 for married couples filing jointly; $54,750 for heads of household; and $36,500 for singles and married individuals filing separately.
• The amount individuals can contribute to their SIMPLE retirement accounts will increase to $15,500.

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

Email:services@surefintaxsvs.com | Web: https://surefintaxsvs.com

 

Year-End Preparation: What You Need to Know and Plan for 2022?

Before it's too late, now is the opportunity to cut your next tax payment by taking advantage of year-end measures that can help you save money.

Whether you donate to a nonprofit organization, put money into your retirement account, or look into helpful tax deductions, taking these tiny efforts now can make a large difference when it comes time to file your taxes. The filing deadline for taxes owed for 2022 is April 18th, 2023.

The following is a list of five tax-related decisions that you should make before the clock strikes midnight on New Year's Eve.

 

1) Key Points

• Reconsider and review your withholding tax deduction.
• Make a right and tax-deductible charitable contribution.
• Maximize your 401(k) deduction.
• Utilize your FSA to the maximum extent.
• Harvest your expected loss.
• Consider wash sale rules.
• Defer your income to reduce tax.
• Withdraw required minimum distribution.
• Review and consider estate planning.

2) Lookback your withholding tax

If you've experienced any significant changes in your career or personal life, such as a raise in salary, a shift in your marital status, the birth of a child, or the purchase of a home, it's vital that you review your current tax withholding. To ensure that the appropriate amount of taxes are being withheld from your paycheck, it is a good idea to review your withholding.

If you don't withhold enough money from your paychecks, you could end up with a tax charge after filing your returns. Altering your tax situation to get more money in each paycheck may be preferable if you withhold too much and end up getting a huge tax refund.

The IRS provides a self-service tool called the tax withholding estimator that can help you determine if you have withheld enough money from your paycheck. To get started, you'll need to have access to your most recent pay stub and tax return.

Read SURE FINANCIALS AND TAX SERVICES LLC: Taxpayers should check their federal withholding to decide if they need to give their employer a new W-4 (surefintaxsvs.blogspot.com) to know when you need to update your employer with new form W-4

3) Think about charitable donations.

Contributing to a charity you care about before the end of the year might have additional benefits, including lowering your taxable income.

Donations to charity are generally deductible only if you itemize your tax deductions. But to itemize, your total deductions must be higher than the standard deduction.

When filing your taxes, the IRS permits you to deduct a standard amount called the "standard deduction" regardless of your personal circumstances. As the government attempts to adjust for the biggest inflation in decades, it has been increasing standard deductions.

The standard deduction amounts for the 2022 tax year (for returns submitted in 2023) are as follows:

• $12,950 for single and married-filing-separately taxpayers
• $19,400 for head of household taxpayers
• $25,900 for married-filing-jointly or qualifying widow(er) taxpayers

However, before making a donation, verify that the charity of your choice is eligible to receive tax-deductible contributions. The Internal Revenue Service (IRS) provides a search tool where you may get up-to-date information about tax-exempt organizations.

To complete your search, you will need either the company name or EIN.

4) Take the benefit of 401(k) contributions.

A 401(k)-retirement account contribution deadline is typically the later of December 31 or your final paycheck of the year. A maximum of $20,500 can be contributed that year. To the maximum of $27,000, an additional $6,500 can be contributed if you are 50 or older. Limits do not apply to employer contributions. There is a cap of $61,000 for 2022 on the sum of your and your employer's contributions.

You need to take action immediately because December will bring your last paycheck of the year. Increasing your retirement contributions typically requires a conversation with your company's human resources division. To make sure you haven't already reached the annual contribution limit, you should know how much you contributed this year.

5 ) Take a look at your Flexible Spending Account (FSA).

Use IT or Lose IT. A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs. FSAs are limited to $2,850 per year per employer. If you’re married, your spouse can put up to $2,850 in an FSA with their employer. You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:(1) It can provide a "grace period" of up to 2 ½ extra months to use the money in your FSA.(2) It can allow you to carry over up to $570 per year to use in the following year. As per https://www.irs.gov/pub/irs-drop/n-21-15.pdf  this rule temporarily  is allowing carry the entire unused amount to next year.

6 ) Harvest your loss.

Tax loss harvesting is when you sell some investments at a loss to offset gains you’ve realized by selling other stocks at a profit. The result is that you only pay taxes on your net profit, or the amount you’ve gained minus the amount you lost, thereby reducing your tax bill. Single filers and married couples filing jointly can deduct up to $3,000 in realized losses from ordinary income.

Select this course of action if you are confident that your investment will not rise in value in the near future.

7 ) Keep in mind the wash sale rules

You can’t, for instance, sell a stock to realize a loss and minimize your tax burden—and then rebuy that exact same stock, or even one that’s nearly identical. This strategy is referred to as a wash sale. A wash sale occurs when you sell securities at a loss and within 30 days before or after the sale buy “substantially” identical securities, or acquire a contract or option to do so. The wash sale rule does not, however, preclude purchasing securities in the same industry. For example, you can sell shares of Pfizer and replace them with shares of Merck. 

8 ) Defer your income

By deferring ( postponing ) income to next year, you may be able to minimize your current income tax liability, if your future year tax rate is low. Here are ways you can achieve this strategy

(1) Cash method of accounting: First, the Tax Cuts and Jobs Act (TCJA) widened the class of companies eligible to adopt the cash method of accounting. You still have time to put this plan into action by switching to the cash method automatically before the tax return's due date (including any extensions). Exactly who has the authority to implement this change? As long as inventory is not a significant contributor to income, sole proprietorships, partnerships, and S companies can switch to the cash method of accounting regardless of their average annual gross receipts. A switch to the cash method is made automatically for C corporations (or partnerships with a C corporation partner) with average annual gross receipts of $25 million or less for the past three taxable years.

(2) Postpone Year-End Billing: If you're using the cash approach, put off billing your customers until after the end of the year.

(3) Installment sales: A sale is the transfer of ownership of an item. As long as at least one payment is received in the year after the sale, income recognition is typically deferred under the installment method until the gain is realized. If you think you would sell property before the end of 2022 and it would be financially beneficial to do so, you might want to explore selling the property and reporting the gain under the installment method so that any payments (and tax) can be postponed until 2023 or later.

(4) Interest and Dividend: Treasury securities and bank CDs with maturities of one year or less earn interest, but that interest is not considered taxable income until it is actually received. Investing in bonds or certificates that won't mature until next year is one way to put off collecting interest money. The 2022 tax year won't apply to dividends unless you have constructive receipt of them before December 31. (exceptions may apply if you have control over when dividends are paid to you.)

9 ) Be cognizant about RMD ( Required Minimum Distribution).

Required minimum distributions (RMDs) must be taken from traditional IRAs and employer-sponsored retirement plans after the account holder reaches age 72 (exceptions may apply if the account holder is still actively employed by the plan's sponsor). Withdraw the RMD by December 31st, the end of the tax year for most people. The penalty for not doing so is steep: fifty percent of the amount you were supposed to disperse but didn't. Beneficiaries are typically expected to take annual payments from inherited retirement accounts (and under the 10-year rule), with some exceptions for surviving spouses. Refer to SURE FINANCIALS AND TAX SERVICES LLC: Required Minimum Distribution (RMD) (surefintaxsvs.blogspot.com) for more information.

10 ) Make an estate plan or revisit estate planning.

It's a good idea to sit down with a financial advisor and go over your estate plans towards the end of the year to see if there are any ways you can save money on taxes or improve upon your current approach. The current $12.06 million lifetime gift and estate tax exception, in effect until 2026, may be a topic of conversation. You might also talk about whether or not it makes sense to set up a trust and fund it before the end of the year so as to take advantage of the tax benefits offered by the current legislation.

Contact Surya Padhi at Sure Financials for any question and clarification. Surya Padhi is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals National Association of Tax Professionals (NATP) and  New Homepage - National Association of Enrolled Agents (naea.org). Visit Welcome | Sure Financials & Tax Services, LLC (surefintaxsvs.com) for more information and contact us by calling +1 908.300.9193.

 

 

TaxTips: Rental Income and Taxation | What You Need to Know?

Any U.S. citizen or resident alien gets taxed on their worldwide income, regardless of whether it was earned domestically or abroad. If you own a rental property in a foreign country, you must fulfill a few additional requirements while filing your U.S. tax return. 

Let's explore what you need to know about the taxation of real estate rental income, especially foreign real estate rental revenue. 

 

Key Points 

 

For a thorough understanding of the tax consequences of your rental property under U.S. law, you must understand the following taxation factors. 

1. The property's ownership – how do you acquire it? How you hold title to the real estate property may affect the tax calculation of your rental income and capital gains tax at the time of sale. If you acquired the property through a company or a trust, you must file additional IRS papers. If you inherit property, you may be required to complete form 3520. Sure Financial and Tax Services LLC can advise you on this matter. 

2. Nature of Rental Income - What kind of income does it represent? Your rental income from real property may be taxed or exempt. Your rental loss may or may not be deductible. All of these factors depend on the classification of rental real estate and rental income category. Consult with us for assistance with this. You must distinguish between revenue from personal property, income from investment property, and income from commercial real estate. 

3. Foreign currency conversion rate: When the real estate is located outside the United States, you must examine and account for whether or not the rental activity qualifies as a Qualified Business Unit for currency conversion purposes. This determination resulted in numerous taxing factors. Sure Financials and Tax Services, LLC can provide assistance with this. 

4. Depreciation: In order to determine rental income, you must deduct depreciation on the building in addition to other expenses. Depreciation calculations vary from country to country. Foreign property is depreciated differently when it comes to United States taxes. Cost of acquisition, cost of improvement, and authorized and permissible depreciation play a significant role in determining depreciation. The depreciation claimed as a tax deduction today may be taxable income at the time of real estate sale. 

5. 
   

6. A double taxation treaty with a foreign government stipulates that every U.S. citizen or resident alien gets taxed on their worldwide income, regardless of where it was earned. Consult Publication 901 for information on double taxation treaties. Form 8833, Treaty-Based Return Position Disclosure, may be necessary in certain circumstances. Regarding Section... This is a complex issue that requires the assistance of a tax expert. 

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8. Credit for foreign taxes, if any: Every nation has its unique tax rules and computation method. If your rental property is located in a foreign country, you may be required to pay taxes on the rental real estate revenue to that country. Since U.S. citizens and permanent residents are taxed on their worldwide income, foreign rental income is also taxed in the United States. However, the good news is that you can claim the foreign tax you paid as a deduction or credit, with the credit being more advantageous. For more information, consult Form 1116 - About Form 1116, Foreign Tax Credit (Individual, Estate, or Trust) or contact Sure Financials and Tax Services LLC. 

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10. Expenses Related to Rental Activity: During your rental period, you may have incurred expenses, paid tax and interest, and incurred other costs. For permitted expenses, consult Schedule E - About Schedule E (Form 1040), Supplemental Income and Loss. 

Regardless of your actions, you must keep records to verify your claim. Providing supporting paperwork is required if you are claiming cost-of-improvement depreciation. 

  

At the time of the sale of the rental property, you are required to retain records of the purchase price, any upgrades, depreciation claimed in the past, and rental losses that were not permitted in the past. 

Refer https://surefintaxsvs.blogspot.com/2022/05/irs-record-keeping-requirement.html for IRS record keeping requirement.