As I was conducting a workshop last week focusing on health insurance coverage, an employee asked if he could put additional money in his Health Savings Account (HSA) above and beyond what the employer contribution was.
“Of course!!” I said, and even better, if he made the contribution prior to April 18 it could be used as a deduction for his tax return NOW.
So it got me thinking about other tips that could be shared with employees over the next few weeks to help them muster through the chore of doing their taxes and save a few extra bucks.
- For employees that have a high deductible health plan at work, they can contribute to a Health Savings Account (HSA) as a prior year contribution for 2010 up to $3,050 for single coverage or up to $6,150 for family coverage. This limitation includes any amounts the employer is making on behalf of the employee. Even if the employer does not contribute to an HSA, as long as the group health plan meets the high deductible health plan provisions they qualify to establish their own individual HSA. This will reduce the taxable income for 2010.
- Some employees may not realize they qualify for the Saver’s Credit on their federal tax return. This credit can be as much as $1,000 for contributing to either a qualified plan at work (such as a 401k or 403b) or by contributing to a Traditional or Roth IRA. There are income limits which phase out the credit at $27,750 for single filers and $55,500 for married filing joint. Here’s an example: John and Mary file MFJ and have AGI of $56,000 for 2010. John put in $2,000 to his 401k at work but doesn’t qualify because their income is over the $55,500 threshold. If Mary contributes at least $500 to a Traditional IRA as a prior year deposit their revised AGI will make them eligible for a 10 percent credit on the first $2,000 each. So John gets a credit of $200 for his 401k contribution and Mary gets a credit of $50 for her IRA contribution. That’s a 50 percent return on the money that was put in the IRA as a last minute tax strategy!
- For employees that make under $58,000 who have not yet gotten around to doing their taxes, Uncle Sam has an offer that can’t be beat – free online tax preparation. It’s called FreeFile and the IRS even has a widget on their website that you can install on your company’s intranet to promote the program.
If you have any other last minute tax tips, please share them by commenting about my blog below. Spread the word by creating flyers to post in your break room or send out an email blast within the next week. Your employees will appreciate it.
This was originally published on the Financial Finesse blog for Workplace Financial Planning and Education.