Year-end Health Savings Account Tax Strategies

Year-end Health Savings Account Tax Strategies


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2007 is just around the corner, and there are several issues to consider if you currently have a Health Savings Account (HSA), or are planning on getting one in the near future.

100% of the deposit you place in your HSA is deductible on your federal income taxes. All but four states also make HSA contributions tax-deductible on state income taxes. If you are looking to reduce your 2006 tax burden and put away more money for retirement, your HSA is the first place you should put your money if you have not yet maximized your contribution.

The maximum you can contribute to your HSA in 2006 is the lesser amount of your deductible, or $2,700 for singles and $5,450 for families. Individuals who are 55 or older may contribute an additional $700. Note that contribution limits are pro-rated, based on the number of complete months during the year in which you have a qualifying HSA health insurance plan.

You have until April 15 (or later if you file for an extension) to make your 2006 contribution. If you do not fully fund your account for the current year, you cannot make a catch-up contribution for 2006 after this deadline. However, you can reimburse yourself in later years for qualified expenses incurred in 2006, even if you do not have the funds in your account to reimburse yourself at this time.

In 2007, the maximum annual HSA contribution will go up to $2,850 for individuals and $5,650 for families. Individuals 55 or older will be allowed to contribute an additional $800.

To maximize your tax benefit for 2007, it is important to have your HSA-qualified health coverage in place no later than January 1.

In order to pay for a medical expense from your HSA, it must be a qualified expense. Some of these qualified expenses include dental expenses, eyeglasses, chiropractic visits, over-the-counter medications, and sometimes even nutritional supplements.

Now is a good time to make sure you have an accurate record of your medical expenses for the year. Make sure you separate the expenses for which you have reimbursed yourself from your HSA from those that you paid for out-of-pocket. You'll want to keep receipts for all medical expenditures paid from your HSA with your 2006 tax records. Place the "non-reimbursed medical expenses" in a separate file, keeping them with the concurrent year's tax records in whatever year you decide to reimburse yourself.

The penalty for over-funding your HSA is a whopping 6%. You have until April 15, 2007 to withdraw excess funds for the 2006 tax year to avoid the penalty. Your HSA administrator may notify you of any over-funding, but they are under no obligation to do so. It is your responsibility, so make sure you check into this if you think your may have over-funded you account.

The minimum deductible for HSA-compatible health insurance plans in 2006 was $1,050 for individuals and $2,100 for families. In 2007 this will increase to $1,100 for individuals and $2,200 for families. If you currently have an HSA-qualified plan with the lowest eligible 2006 deductible, that deductible will automatically go up on January 1 to the new minimum.

Strategies to Maximize Your Tax Benefits

There are basically three different strategies you can take when deciding how to fund your health savings account.

1. Put no money in the account, except when you incur a medical expense. This strategy allows you to legally "launder" any money used to pay medical expenses. In other words, by depositing money into your HSA, then immediately withdrawing it to reimburse yourself for medical expenses, you are making your medical expenses all tax-deductible. You may want to use this strategy if you are on a tight budget and want to keep your cash outlay as low as possible.

2. Fully fund the account, or at least put in as much as possible based on your budget. Take money out of the account any time medical expenses are incurred, and let the rest grow tax-deferred. This strategy will maximize your tax deduction, while making your HSA funds available to pay any non-covered medical expenses before your deductible is met.

3. Fully fund the account, but pay all medical expenses from a non-HSA account. Reimburse yourself for medical expenses at a later date. This strategy will allow you to maximize your tax deduction, and will also allow you to maximize the tax-deferred growth of your HSA. You can then reimburse yourself, tax-free, at any time in the future for medical expenses incurred over the ensuing years.

To maximize the potential growth of your funds, you may want to make your 2007 deposits as early in the year as possible. Any growth in your account is tax-deferred, like an IRA. If possible, you should plan to make your deposit the first week in January.
by: Wiley Long

Fairtax: America's Only Choice

FairTax is a proposal in the United States of America to impose a national sales tax and end the following federal taxes: personal income taxes, payroll taxes, corporate taxes, capital gains taxes, self-employment taxes, gift taxes and inheritance taxes. The FairTax plan will pay to all citizens a monthly entitlement equal to the average sales tax paid on necessities by similar individuals and allow for workers to receive 100% of their paycheck.

1. The History of Our Income Tax
“Those who don’t learn from history, are doomed to repeat it” George Santayana
The cost of Fighting a war can be high,the government is usually obligated to TAX in order to fund a war. In 1812, The United states went to war with England,This is where the Government initiated the first sales and income taxes (taxes on alcohol, sugar , tobacco etc.) The first attempt at an income tax came about to raise funds for the Civil War. in 1861 a bill was passed assessing 3% income tax. And when the war was over, they did away with the taxes, Once again. In 1894, congress presented a 2% tax on any one making over $4,000. A few years later the bill was deemed “unconstitutional” and disappeared once again. When the income tax was initiated, on ly 1 half of 1% actually paid this tax. And once again, America Went to war, and taxes reappeared once again.

2. ..Then Came Withholding How much DOES the government keep,do you know? Do they Know?
Politians love with holding because it allows then to grab “their” share of your earnings before you even see a paycheck. The 16th Amendment ratification was the first income tax law. In 1913, law established the income tax allowing the federal government to WITHOLD taxes’ from workers’ paychecks. Withholding is most clearly defined as: A tax on income that is levied at the source, thus diverted to the government before the recipient of the income ever sees it. It is an income tax withheld from employees' wages and paid directly to the government by the employer

3. The Myth of Corporate Taxes “There is only one entity in this country that actually pays taxes, and that entity is YOU!”
A Corporate tax refers to the tax paid by corporations or Businesses on the incomes they earn. When it comes right down to it, Corporations and business’s NEVER have paid taxes. Businesses and corporations merely collect the taxes from the individuals and pass them on to the government. Taxes are paid from wages, and only the individual persons EARN wages. Only individuals create wealth, only individuals retain wealth. The corporate tax rate in the United states is the 3rd highest in the industrial world.

4. Our Current Tax Code: The Cost of Compliance “Don’t you just love the money you spend every year paying someone to help you pay the government”
Definition :The cost of Compliance is the money the government keeps that other would be refunded to the tax payers which includes: the time and money spent on record keeping and accountants, the billions of dollars spend in ‘tax planning’,the tax seminars,tax record keeping, preparation of taxes and the filling of forms and returns.
The costs of our current system of taxation goes far beyond the actual taxes that we “pay” The trouble you go through every year is an estimated 27 hours. 27 hours of shifting through old recipts, check stubs and other documents,this im sure you can concur can get alittle tedious. So we do what all Americans in the same situation does, just pass off the responsibility to and accountant , CPA or tax preparation. In this case, taxpayers have decided that the cost of claiming the tax deductions is not worth the trouble,and in most cases just file a tax return with no deductions. This therefore initiates a sequence of events sending millions of hard-earned dollars(WHICH aren’t really owed) to the federal government anyway. Fact: Most taxpayers who COULD claim the coveted home mortgage interest deduction choose not to just to save an hour or two. 52.8% of tax compliance costs are paid by businesses,leaving rough 44% to be paid by US the individual. Tax payers spend all their money on tax return preparation andin most cases they are filled incorrectly. The money spent by businesses and investors calculating the tax implications of their business decisions is Compliance. They spend time making tax decisions when they should be making economic decisions. Almost $500 BILLION! With the FairTax, your compliances cost drop to absolutely NOTHING. You can earn your money and keep it to invest, not tedious bookkeeping and accountants.

5. The Embedded Costs of Our Tax Codes “Just how much of our money actually ends up in the federal governments pockets?” [22%] Represents embedded taxes
When you buy any product or using any service you the consumer are paying a portion of all the bills, including tax bills and every person, business or entity that had anything to do with it. The cost gets passed down the line from say a seed grower,to a farmer to the super market and to finally YOU. Every single business or corporation is paying taxes. That means when you buy anything you’re paying a portion of those taxes all the way down the line. All of these elements make up a part of the cost of the consumer goods we buy from thee corporations,and they are all eventually paid by the consumer. Before you even get your pay check the government has already taken out income tax,social security and Medicare. And your still not done paying! If FairTax is enacted the tax burdens of the corporations will disappear and would immediately see a 22% increase in profit margins. And the comsumer would be recieveing 100% of his/her check,stimulating economic prosperity and spending and investments. Prices of goods and services will drop dramatically and thus competition for business begins to thrive and stimulate our economy. Prices would fall 20%. You also receive a check every month equal to the amount of sales tax you would spend on basic necessities for that month.

6.Bringing American Business Back Home
“American business over sea could be eliminated…for GOOD!?”
The effect on these ‘hidden’ taxes has costed out economy in the form of American jobs being outsourced and moved over seas. Many Businesses have moved their headquarters and production to over seas where they will not be taxed as much as over here. FairTax will fire up particular incentive to move American based corporations back home. The taxes on capital and labor would be eliminated. The only way for any global business to compete with us would be to move their headquarters over here, Thus stimulating the economy, creating jobs and increasing stock values. There would be no reason to shirt American companies over seas,more jobs more revenue for America giving US the advantage.

7. The Birth of the FairTax “Well, Why don’t you Do something about it?”
The American for Fair Taxation a corporation that argued for the Fairtax saying it would raise the same amount of revenue for the government as the current taxes but would be less intrusive and fusterating.

8. The FairTax Explained “The FairTax abolished all taxes on income..”
You have all seen the prices America’s economy has paid in compoliance with our current tax system: driving tax price up to 22%,driving jobs and businesses that could create revenue for America overseas and putting strains on the low and middle class families of america.
The FairTax Act of 2005
When the FairTax is enacted(hypothetically speaking of course) it will repeal the following:
Individual Income Tax Miniumum Tax Corporate and Business Taxes Capital Gains Taxes Social security tax Medicare Taxes Self-emplyment Taxes And those are just to name a few. All of those taxes will be replaced with a single simple Sales tax,paid Upfront on goods and services. And replaces it with 23% Consumption tax. The FairTax is Neutral taking no sides or being biased in any way. Prices of everything from doctors to tooth paste with Decreas exponentially.The FairTax would also treat all government purchases as taxable purchases! It relieves the tax burden on lower and middle class families allowing them to save and invest their money Prebate-an Advanced Rebate that the government will send every family that covers the projected sales taxes that covers the basic necessities.

9. The FairTax Prebate: The Key to Fairness “..Paying for the basic necessities without any taxation..at ALL!”
The initiation of the fairTax would virtually replace all personal and corporate taxes with a single Consumption tax, which would bring a period of transformation and economic growth to America, one in which we have NEVER seen before. Since there is NO taxes consumers will be paying virtually 20% less on everything they buy including food and shelter. Condensing the complicated Tax forms into One simple filing report with the government.

10.Underground and Offshore Economy…Taxed at last!
A survey in 2000 estimated that a reported $355 Billion dollars was lost that year in tax revenue. How you say? “Underground economy” or illegal activites such as: Drug sales,prositution and black market sales. Well , The government isn’t going to let $355B slip through their fingers now are they? No where does the responsibility of making up that ‘lost’ money come from, You GUESSED it, US the consumers. A reported $2,000 extra is what a single person pays to make up for these losses.
¾ of all $100 bills circulate outside of the United States,however since US money is back up by Backnotes and bonds as long as that money is in circulation the federal government does not have to pay for it That saves us roughly $32.8B in intrest Alone. All Americans Lie and cheat to get to the Top, this is true about paying taxes also, a reported $1,5 TRILLION was reported as “undeclared earnings” Under the FairTax plan, Criminals wil pay their taxes every time they spend money anywhere(food,clothing,houses) This would Inject even More money back into our economy. Also $11 trillion dollars are stored offshore when they could be gaining intrest here in America, if this plan is enacted we get that back too! If we eliminated all taxes on capital and labor, as the FairTaxdoes, the United States would become the world’s tax haven. We have the most stable economy,the most liquid and trusted markets, and the highest rates of labor productivity in the World. And Trillions of dollars would come from foreign markets trying to get a piece of it.

11.So we’ve Done It. What happens to our Economy? “When we all start getting 100% of our earned income in our paychecks--and figure out that we’re not being taxed..we’ll start saving and investing instead of spending every dollar!”
In 2003, $ 203 Billion was spent on IRS fillings alone, Money that could have been put to much better use under the FairTax plan. Economist estimate that in the first year alone our economy will grow 10.5% and exports will increase 26%! Capital Spending will increase 70%, our interest rates are supposed to decline as much as 30%! While the American worker is collecting 100% of their paychecks. The $400B to $500B we spend Compling with the IRS would be Additional money in our pockets.It would create jobs,increased profit margins and stock prices, new businesses. If our corporations werer the only NO embedded tax companies in out pricing system, NO one could even come close to competing with us. To remain competitive Foreign corporations will have to build plants and businesses here in America and soon enough enact a Fairtax of their own.
Overview of FairTax Collection of 100% of our pay checks We all get virtual Raises, since payroll taxes no longer apply. We will start receiving month Prebates equal to the amount of Consumption tax we would pay. Saving and investing will Sky rocket The prices of goods and services with remain virtually the same Rich Americans will bring their money back from off shore accounts and put it back into our economy. With lower intrest rates, higher saving rates and more disposible spending,it is clear that both home sellers and home buyers will benefit from this.
Chapters 12-16 Overview and Facts Since 1986, supposingly since our tax code was ‘simplified’ has been changed over 10,000 times..simple huh? The fairTax would cause no damage to retailers but increase profit margins! Medicare estimates by 2020 they will be bankrupt Social security will disappear by 2045 The Fair Tax would Double the size of our Economy in the first 15 years. By Steven Trager

What Is A Credit Rating?

A credit rating is a formal appraisal of an individual, corporation, autonomous governments, conglomerates, administrative and financial organizations, or even a country, evaluated on the basis of past financial transactions and present assets and liabilities. From a credit rating a credit granter or a financier can evaluate the ability of a borrower to repay a loan.
In the United States., for a personal credit rating, a credit agency studies the financial statistics of an individual and allots an individual a 3-digit number called the FICO credit score. Such agencies are called credit bureaus -- companies that assemble and keep a record of the credit history of an individual. In U.K., these bureaus are referred to as the credit reference agencies. Generally they charge a fee for allocating a credit score. If the information they furnish in the credit report is found to be false and detrimental for an individual, they can be litigated for slander.
The principal credit bureaus in the United States are Experian, Equifax, and TransUnion, while Experian, Equifax, and Callcredit are the principal credit reference agencies in the United Kingdom. According to Canadian Imperial Bank of Commerce, the major credit bureaus for individuals are Equifax, TransUnion and Northern Credit Bureaus in Canada. The leading global credit rating agencies are Moody's, Standard and Poor's and Fitch Ratings.
Managing a good credit score is important, especially when you are planning to take a loan or to buy a big automobile, or real estate, or renting an apartment, or even making arrangements for a vacation. Investors consider a low credit rating as the sign of a high risk of non-payment of a debt. Thus they tend to charge exorbitant interest rates.Moreover credit ratings are nowadays used to adjust insurance premiums, to ascertain the amount of a utility or leasing deposit, and even to corroborate an individual’s eligibility for employment.

http://www.onlineloanofficers.com/Terms/credit-rating.html

How to Prepare Taxes Online

Each year, more people are filing their tax returns online. The number of taxes filed online has increased dramatically in the last five years. According to the IRS this trend will continue in coming years.

Learning how to prepare taxes online is a simple process. You can find many good websites on the internet that have quality tax preparation and filing programs. Most of these programs have an easy to follow system that will guide you through the tax return process.

Once you have found a website for preparing and filing your taxes, you will be asked to create a user account. This will allow you to log into your account at any time and work on your tax return. You can take as much time as you want before submitting your completed tax forms to the IRS.

Now that you have found a tax preparation website and created your user account it's time to prepare your taxes. All you have to do is answer the simple questions asked by the tax program. Typically your personal information will be needed first, then you will be asked a series of questions about your earnings and deductions that you may qualify for.

If you have never done this before then it might be a little intimidating at first. With most online tax preparation programs you can stop and take a break at any time and not lose any of the information you have already entered. You can also go back to any section that you might not be sure of and make changes later.

Every year online tax programs are being made more and more user friendly so that anyone can learn to prepare their taxes online accurately, quickly, and easily. So, go ahead and give online tax preparation and filing a try. You'll be glad you did!

It's easy to Prepare Your Taxes Online. Learn how get all the tax deductions and credits you deserve! You can use the Free Tax Estimator provided by Turbo Tax Online to prepare and file your taxes this year.

Tax Software For Home Based Internet Business

There are many advantages to having a home based internet business. One of the main advantages are the tax saving benefits. When you operate a home based business you may qualify for many tax deductions and credits.

A good tax software system for a home based business will assist you in finding all of the tax benefits that are available to you. One of the most obvious deductions will be the home office deduction. If you operate a business from your home you are able to deduct a portion of your rent or house payment on your taxes.

The next most important tax benefit will be your right to deduct expenses incurred in the pursuit of your home based business. Telephone, computer, internet, ink cartridges, paper and so on.

When you use a tax software programmed designed for a home base business or for a (home-base internet business) you will find that all of the forms you are most likely to need will already be supplied for you. There will also be detailed instructions and guidance to help you get it just right.

So, what is involved in preparing your home business taxes.

First, you will be required to fill out a schedule c, profit and loss form. Don't worry, your tax software will provide this for you and should explain in detail how to fill it out. This form will ask for your income from your home based business and will have categories for your expenses. After you have filled out the schedule c form, the software will compute your profit or loss from your home based business. The profit or loss from your business will then be attached to your normal 1040 federal income tax form.

If you have a home based internet business, then it might be time for you look into tax software designed especially for home-based businesses. You could save more than you think!

You can use the Free Tax Estimator provided by Turbo Tax Online to estimate your home based business taxes. You can also find lots of Free help & information to Prepare & File Your Taxes Online and get all the tax deductions and credits you deserve.
By FrankW Ellis