What Insurance Premiums can be covered by an HSA(Health Savings Account)?

 The following 4 types of health insurance can be paid for from your HSA: 1. long-term care insurance 2. health care continuation coverage under COBRA 3. health care coverage while receiving unemployment and 4. Medicare parts B and D if you are 65 or older. You cannot use your HSA to pay for any medicare supplemental plans like Medigap. 

Give your employees a raise!

 A Presidential Memorandum has authorized the deferral of the employee share of the social security tax of 6.2% for the period Sept 1, 2020 to December 31, 2020. This is a voluntary program for the employer, and is only a deferral not a forgiveness of the tax. Employers are responsible for paying the deferred tax between Jan 1, 2021 and April 30, 2021 even if the employees no longer work for the company. Employees that make more than $104,000 are not eligible for the program. This is a great way to increase take home pay now for your employees while they are dealing with this crisis. In 2021, the employees will have their take home pay reduced by the pay back. 

Age Limit for Traditional IRA Contributions

 The age limit of 70 and 1/2 for traditional IRA contributions is now gone effective for 2020 and beyond. Now it doesn't matter how old you are, you can still make a regular IRA contribution as long as you have earned income. 

Set up a Sole Proprietorship Instead

 When you start a new business, think about the simplest form first like the sole proprietorship. This method does not require another tax entity because you just file a schedule C with form 1040 reporting your business income and expenses. You don't really miss out on most tax benefits with this form of business. Putting on the corporate shell does give you more liability protection, but you can also buy liability insurance to cover that risk. You don't have to pay legal fees to set up a sole proprietorship. You also don't have to pay annual fees of $50 to the state. Some taxpayers like to set up a separate business entity (LLC, Sub S or C corp) and put it on the shelf for use someday. I feel this is a bad idea as the IRS looks for the business tax forms to be sent in every year even if there is no activity, and you also still have to pay the state's annual registration fees. 

Donating Business Property

 When you donate business property to a charity, you can only deduct your cost or basis. Most business equipment has a basis of 0 because of depreciation so donating old business equipment to charities doesn't give you much of a tax break. You can deduct the cost not the retail value of donated inventory. This stands in marked contrast to donating clothing and household items where you can  deduct the fair market value which is usually much less than the cost. 

Statute of Limitations

The IRS has 3 years from the later of the time you filed the return or the due date of the return to examine it and assess additional tax. For example, if you filed your 2016 tax return on March 15, 2017, then the IRS had until April 15, 2020 to examine the return. If you extended the 2016 tax return to October 15, 2017 and filed by that date, then the IRS has until October 15, 2020 to pick it for examination. Pretty soon most taxpayers can throw away the 2016 supporting documents.

Emailing Tax Returns over the Internet

Whenever I send you an electronic copy of your tax return, I use ahead pdf encrypt software to send it encrypted. I can easily set up a password so you can open the file on your end. This can work both ways. You might consider sending me confidential files using software that will encrypt it so that it remains private if you don't want to mail to me or drop it off at my office. I paid $25 several years ago for this software and that is the only cost. There are no annual fees or update charges.