Flexible Spending Accounts or FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, now is when many employers are offering employees the option to participate during the 2018 plan year.

Interested employees who wish to contribute to an FSA during the new year must make this choice again for 2018, even if they contributed in 2017. Self-employed individuals are not eligible.

An employee who chooses to participate can contribute up to $2,650 during the 2018 plan year (up from $2,600 in 2017). Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA.

Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details about eligible expenses and claim procedures.

Under the use or lose provision, participating employees must often incur eligible expenses by the end of the plan year, or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.

Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year–for example, an employee with $500 of unspent funds at the end of 2018 would still have those funds available to use in 2019. Under the grace period option, an employee has until 2 1/2 months after the end of the plan year to incur eligible expenses–for example, March 15, 2019, for a plan year ending on December 31, 2018. Employers can offer either option, but not both, or none at all.

Employers are not required to offer FSAs. Accordingly, interested employees should check with their employer to see if they offer an FSA. Please call if you have any questions about how FSA contributions affect your taxes.

Taxpayers born before July 1, 1947, generally must receive payments from their individual retirement arrangements (IRAs) and workplace retirement plans by December 31.

Known as required minimum distributions (RMDs), typically these distributions must be made by the end of the tax year, in this case, 2017. The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2017 RMD, this amount is on the 2016 Form 5498 normally issued to the owner during January 2017.

A special rule allows first-year recipients of these payments, those who reached age 70 1/2 during 2017, to wait until as late as April 1, 2018, to receive their first RMDs. What this means that those born after June 30, 1946, and before July 1, 1947, are eligible. The advantage of this special rule is that although payments made to these taxpayers in early 2018 can be counted toward their 2017 RMD, they are taxable in 2018.Continue reading

Cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2018 have been announced by the IRS. Here are the highlights:

In general, income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit all increased for 2018. In addition, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,000 to $18,500. However, contribution limits for SIMPLE retirement accounts for self-employed persons remains unchanged at $12,500.

Traditional IRAs

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions; however, if during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-out amounts of the deduction do not apply. Here are the phase-out ranges for 2018:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000.
• For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000, up from $99,000 to $119,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $189,000 and $199,000, up from $186,000 and $196,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Continue reading

Now that it appears congress is on the cusp of (finally) formalizing a comprehensive tax reform package for 2018, we are getting some clarity on what many of the final provisions of the bill are looking like. Many taxpayers are expected to see a decrease in overall tax rates starting with the 2018 tax year. Additionally, some deductions are being greatly modified or eliminated which puts many of us in a position to make choices before the end of the year on how to best position ourselves to avoid losing deductions by making payments in the correct year. The interesting thing about this bill is that different taxpayers will be affected in wildly different ways. There will be winners and there will be losers. Each situation is unique. Though we are running out of time, we are assisting clients as best we can right now. Please do reach out to your Wheeler Accountants advisor for specific tax advice applicable to your situation.Continue reading

If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. However, if the property fits into one of the categories discussed here, the amount of your deduction must be decreased. As with many aspects of tax law, the rules are quite complex. If you’re considering a charitable contribution of property, here’s what you need to know:

After discussing how to determine the fair market value of something you donate, we’ll discuss the following categories of charitable gifts of property:

• Contributions subject to speciial rules
• Property that has decreased n value;
• Property that has increased in value;
• Food Inventory.
• Bargain Sales.

Continue reading

As IRS e-Services begins its move later this month to Secure Access authentication and its two-factor protections, cybercriminals are likely to make last-ditch efforts to steal passwords and data prior to the transition.

IRS e-Services users should be aware of a new phishing scam that tries to trick tax professionals into “signing” a new e-Services user agreement.

The phishing scam seeks to steal passwords and data.These and other sophisticated schemes are adaptive in nature, and everyone should be cautious before clicking on a link or entering sensitive personal information.

How the e-Services Scam Works

The scam email claims to be from “e-Services Registration” and uses “Important Update about Your e-Services Account” in the subject line. It states, in part, “We are rolling out a new user agreement, and all registered users must accept its revised terms to have access to e-Services and its products.” It asks the individual to review and accept the agreement but takes them to a fake site instead.

What to do if you Clicked on a Link

For those who may have clicked on this link, perform a deep scan with security software, and then contact IT/cybersecurity personnel and the IRS e-Help Desk on IRS.gov.

Questions or Concerns?

Don’t hesitate to call our office at 408-252-1800 if you have any questions about IRS e-Services or believe you may have been a victim of an IRS-related scam. To learn more about what the IRS is doing to protect accounts with Secure Access authentication, please visit the e-Services landing page on the IRS website.