Copyright 2018 - Pfeiffers Accounting & Consulting LLC

Are you confused about your choices for paying medical expenses under your employer's benefit plan? Here are differences between two types of commonly offered accounts: a health savings account (HSA) and a health care flexible spending account (FSA).

Overview. An FSA is generally established under an employer’s benefit plan. You can set aside a portion of your salary on a pretax basis to pay out-of-pocket medical expenses. An HSA is a combination of a high-deductible health plan and a savings account in which you save pretax dollars to pay medical expenses not covered by the insurance.

Contributions. For 2016, you can contribute up to a maximum of $2,550 to an FSA. Typically, you have to use the funds by the end of the year. Why? Unused amounts are forfeited under what’s commonly called the “use it or lose it” rule. However, your employer can adopt one of two exceptions to the rule.

If you are single, the 2016 HSA contribution limit is $3,350 ($6,750 for a family). You can add a catch-up contribution of $1,000 if you are over age 55. You do not have to spend all the money you contribute to your HSA each year. You can leave the funds in the account and let the earnings grow.

Earnings. FSAs do not earn interest. Your employer holds your money until you request reimbursement for qualified expenses. HSAs are savings accounts, and the money in the account can be invested. Earnings held in the account are not included in your income.

Withdrawals. Distributions from both accounts are tax- and penalty-free as long as you use the funds for qualified medical expenses.

Portability. Normally, your FSA stays with your employer when you change jobs. Your HSA belongs to you, and you can take the account funds with you from job to job. That’s true even if your employer makes contributions to your HSA for you.

Because you generally can’t contribute to both accounts in the same year, understanding the differences can help you make a decision that best fits your circumstances. Contact us for help as you consider your benefit choices.

When you own a car for your business, there are two different ways you can use the vehicle  for tax related deductions for your business. You can either use the car mileage (for business miles only) or the actual expenses (for business useage only).  These two ways are better defined below:

  1. Standard mileage rate: 55.5 cents per mile (2012 rate).  You can deduct the 55.5 cents per mile for the mileage driven only for business plus parking fees and tolls for business only.
  2. Actual expenses: You can deduct all actual expenses related to the car (for business related purposes only) such as insurance, cost of the car, gas & oil, license, parking fees, registration, repairs, tires, tolls, and even garage rent.

Note you must choose one or the other. If you choose the actual expense method, you cannot change back to the standard mileage rate for that vehicle in later years. More can be found on the IRS website http://www.irs.gov/newsroom/article/0,,id=250882,00.html

Copyright Jeanine Pfeiffer

As a business owner, it is easy to overlook business tax deductions. Many of the things that aren't normally tax deductions for individuals are deductions for businesses.  Some examples are as follows:

Your car: If you use your car in your business, you can deduct the business cost of the car, plus operating and maintenance expenses that relate to business activities.  You can take the deduction based either on the actual costs or the IRS 'standard mileage rate' whichever gives you the greater deduction. You can use this deduction whether you or your business owns or leases the car.

Personal assets: Some of your personal assets can become business tax deductions. They can become partially or in total depending upon how much you use the asset for your business. For example, if you use your home computer for 60% business purposes, you can deduct 60% of the costs and operating expenses for the computer.

Your home: The home office is the portion of your home that is used for business purposes. In order to qualify for this deduction, your home office must be used exclusively for the business.

Your family: Sometimes you can convert family activities into tax-deductible expenditures for your business. For example, if you don't qualify as an employee of your businss, you might be able to create deductible family medical coverage for your spouse, children and yourself by hiring your spouse in your business. You can allso hire your parents to perfom legitimate work for your business.

Travel: Travel expenses, such as airline tickets, taxi fares, baggage, shipping, your car rental fee, overnight lodging, 50 percent of the cost of meals and other expenses are tax-deductible when you travel on business. Just remember that when you combine personal travel with business, the expenses must be pro-rated between the two. You can also deduct the cost of an employee, partner or customer who travels with you.

Entertainment: You can deduct 50 percent of your business-entertainment expenses. These expenses include business meals, as well as the cost of attending entertainment where you discuss relevant business topics with a customer or client. It can also include tickets to sporting events that your customers attend, concerts, etc.

Many of your business expenses can be written off as a deductible expense.  A list of some are below:

Advertising

Bad debts

Bank charges

Books

Car and truck expenses

Commissions to sales staff

Donations

Dues

Educational expenses

Freight costs

Insurance

Interest costs

Laundry/cleaning

Legal and professional fees

Licenses for business

Lodging

Maintenance

Meals/Entertainment of clients

Office supplies

Pensions

Postage

Printing costs

Property taxes

Rent

Repairs

Sales taxes collected

Telephone

Travel

Uniforms

Utilities

Wages paid

This list is not all inclusive but gives you a general idea of the types of expenses in your business that are deductible for tax purposes.

Copyright Jeanine Pfeiffer

When you operate a legal entity, you are required to file a tax return at the end of every year. How you account for your business expenses will either help your company get the most back or the least amount to owe the IRS at year end, as long as you record all expenses.  Recording all of your expenses is just the first step, however, in getting your data ready for deductions at year end. What many people are unaware of is that on your tax return, for example on your 1120-S return there is a place in your deductions section on your first page, where it gives you a line item for other deductions.  This other deductions section is where you will record the total of most of your administrative expenses from your income statement. Other deductions are such expenses as:

Bank charges insurance (business)
Computer expenses utilities
licenses and permits
Equipment rental maintenance
Office supplies miscellaneous
outside services parking fees
postage and freight
printing and reproduction
legal fees
public relation
telephone
travel
qualified moving expenses
professional fees
meals and entertainment (50% only)

Follow us on

Pfeiffers Accounting & Consulting LLC BBB Business Review