Health Savings Accounts Keep Getting Better

Contributing to a Health Savings Account is unique by allowing for tax-deductible contributions combined with tax-free distributions.  No other tax-advantaged savings opportunities allow for both.

With each passing year, HSAs continue to gain in popularity.  To be eligible, you need to be a participant in a qualifying high-deductible health insurance plan sponsored by your employer or purchased individually. Ask the insurance company that administers your current health plan whether you qualify to contribute to an H.S.A.

According to the IRS in their Publication 969 on Health Savings Accounts and Other Tax-Favored Health Plans available at: For 2022, if you have self-only HDHP coverage, you can contribute up to $3,650. If you have family HDHP coverage, you can contribute up to $7,300.  The IRS just announced that the maximum contributions to an H.S.A. for 2023 will increase to $3,850 for individuals with self-only coverage and $7,750 for individuals with family coverage.

Anyone 55 or older can add an additional $1k to their H.S.A. this year. Married couples with both spouses over the age of 55 can add a second $1k, but the second spouse would need to set up their own Health Savings Account, which shouldn’t be a dealbreaker. The deadline to contribute to your H.S.A. is April 15th of the following year.  So now is the time to start contributing for 2022.

Unlike Flexible Spending Accounts that come with a “use it or lose it” provision requiring the money to be spent on your family’s medical expenses the year it is set aside, money in an H.S.A. can be invested long-term in a tax-deferred account that will be available to pay your family’s healthcare costs down the road.  A common strategy is to max out the contributions to the H.S.A. each year, but then use personal funds to pay medical expenses as they become due as a way to keep as much money as possible growing within the tax-advantaged Health Savings Account.

Most financial institutions now allow for investors to set up Health Savings Accounts, allowing individuals to easily invest their H.S.A. in mutual funds or ETFs.

Tax deductible contributions coupled with tax free distributions is as easy as finding out if you participate in a qualifying high deductible health insurance plan and then maxing out the allowable contributions into a Health Savings Account whenever eligible.

I-Bond Alert: Interest Rate Jumps to 9.62% For The Next Six Months

We first wrote about I-Bonds in an article included with our November Newsletter available at:

I-bonds are a great place to park some extra money if you are worried about the short-term prospects for the stock market and are nervous that increasing interest rates will cause bond funds to decline in value too.

If you didn’t invest some of your extra money in I-Bonds when those treasury bonds were paying 7.12% interest, how about setting up an account at and purchasing those inflation protected bonds now that rates are projected to be at 9.62%?  (according to an article by Forbes available at:

More information on I-Bonds is available at:

IRS Reminds Taxpayers Of Penalty Relief Related To Claims For the ERC

If you received an ERC for 2020, we’ll be preparing an amended 2020 tax return this summer for you to report the amount of the ERC received as a decrease to deductible wages. Expect to owe taxes of about 35% of the ERC received with the amended tax return.  While owing additional 2020 taxes on the amount of the ERC received is fine, paying penalties on the taxes due wouldn’t be fair since the ERC wasn’t actually received until 2022.

Why would you be penalized?  If the amount of taxes you owe after April 15th exceed a certain threshold based on each taxpayer’s total tax liability, the IRS automatically tacks on penalties.  These penalties tend to be relatively modest, but the higher the ERC received, the higher the penalties could be in connection with the 2020 amended return you’ll be submitting.

Recently , the IRS issued a news release reminding taxpayers that they can get penalties waived for amending 2020 tax returns due to the ERC at as follows:

IR-2022-89, April 18, 2022

WASHINGTON — The Department of the Treasury and the Internal Revenue Service have received requests from taxpayers and their advisors for relief from penalties arising when additional income tax is owed because the deduction for qualified wages is reduced by the amount of a retroactively claimed employee retention tax credit (ERTC), but the taxpayer is unable to pay the additional income tax because the ERTC refund payment has not yet been received.

Treasury and the IRS are aware that this situation may arise, in part, due to the IRS’s backlog in processing adjusted employment tax returns (e.g., Form 941-X) on which the taxpayers claim ERTC retroactively. Based on applicable law, IRS guidance provides that an employer must reduce its income tax deduction for the ERTC qualified wages by the amount of the ERTC for the tax year in which such wages were paid or incurred. Taxpayers that claimed the ERTC retroactively and filed an amended income tax return reducing their deduction for the ERTC qualified wages paid or incurred in the tax year for which the ERTC is retroactively claimed have an increased income tax liability but may not yet have received their ERTC refund.

This release reminds taxpayers that, consistent with the relief from penalties for failure to timely pay noted in Notice 2021-49, they may be eligible for relief from penalties for failing to pay their taxes if they can show reasonable cause and not willful neglect for the failure to pay. In general, taxpayers may also qualify for administrative relief from penalties for failing to pay on time under the IRS’s First Time Penalty Abatement program if the taxpayer:

  1. Did not previously have to file a return or had no penalties for the three prior tax years,
  2. Filed all currently required returns or filed an extension of time to file and
  3. Paid, or arranged to pay, any tax due.


Upcoming Deadlines

Don’t forget – these are the upcoming tax deadlines for 22021 Individual (1040) tax returns:

Friday, April 15 

  • Deadline to file FinCEN Form 114 for Foreign Bank and Financial Accounts (FBAR)

Monday, April 18

Deadline changed due to April 15 Emancipation Day holiday in Washington, DC

  • Deadline to file personal (1040) tax returns for taxpayers except MA and Maine residents
  • Deadline to pay Estimated Tax Payments for 1st Quarter 2022
  • Deadline to make any IRA contributions for 2021

Tuesday, April 19

Special deadline for Massachusetts and Maine residents due to Patriot’s Day holiday on April 18

  • Deadline to file personal (1040) tax returns for MA and ME residents
  • Deadline to pay Estimated Tax Payments for 1st Quarter 2022 for MA and ME
  • Deadline to make any IRA contributions for 2021 for MA and ME

TIP – Avoid the Crush!  IRS and State Dept. of Revenues’ servers experience extremely high volumes close to efiling deadlines.  This can cause processing delays (or worse, temporary outages).  Don’t wait until April 18/19 to send in your efile forms.

Tax Time Guide: Saving for retirement? IRA contributions for 2021 can be made until April 18

From IRS News – IR-2022-52

The Internal Revenue Service reminds taxpayers they may be able to claim a deduction on their 2021 tax return for contributions to their Individual Retirement Arrangement (IRA) made through April 18, 2022.

An IRA is a personal savings plan that lets employees and the self-employed set money aside for retirement and can have tax advantages. Contributions for 2021 can be made to a traditional or Roth IRA until the filing due date, April 18, but must be designated for 2021 to the financial institution.

Generally, eligible taxpayers can contribute up to $6,000 to an IRA for 2021. For those 50 years of age or older at the end of 2021, the limit is increased to $7,000. Qualified contributions to one or more traditional IRAs may be deductible up to the contribution limit or 100% of the taxpayer’s compensation, whichever is less. There is no longer a maximum age for making IRA contributions.

Those who make contributions to certain employer retirement plans, such as a 401k or 403(b), an IRA, or an Achieving a Better Life Experience (ABLE) account, may be able to claim the Saver’s Credit. Also known as the Retirement Savings Contributions Credit, the amount of the credit is generally based on the amount of contributions, the adjusted gross income and the taxpayer’s filing status. The lower the taxpayer’s income (or joint income, if applicable), the higher the amount of the tax credit. Dependents and full-time students are not eligible for the credit. For more information on annual contributions to an ABLE account, see Publication 907, Tax Highlights for Persons With Disabilities.

While contributions to a Roth IRA are not tax deductible, qualified distributions are tax-free. Roth IRA contributions may be limited based on filing status and income. Contributions can also be made to a traditional and/or Roth IRA even if participating in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA-based plan).

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools at This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax For Individuals.

More resources

Two tax credits that can help cover the cost of higher education

Higher education is important to many people and it’s often expensive. Whether it’s specialized job training or an advanced degree, there are a lot of costs associated with higher education. There are two education tax credits designed to help offset these costs – the American opportunity tax credit and the lifetime learning credit.

Taxpayers who paid for higher education in 2021 can see these tax savings when they file their tax return. If taxpayers, their spouses, or their dependents take post-high school coursework, they may be eligible for a tax benefit. To claim either credit, taxpayers complete Form 8863, Education Credits, and file it with their tax return.

These credits reduce the amount of tax someone owes. If the credit reduces tax to less than zero, the taxpayer could even receive a refund. To be eligible to claim either of these credits, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution. There are exceptions for some students.

Here are some key things taxpayers should know about each of these credits.

The American opportunity tax credit is:

  • Worth a maximum benefit of up to $2,500 per eligible student.
  • Only available for the first four years at an eligible college or vocational school.
  • For students pursuing a degree or other recognized education credential.
  • Partially refundable. People could get up to $1,000 back.

The lifetime learning credit is:

  • Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify.
  • Available for all years of postsecondary education and for courses to acquire or improve job skills.
  • Available for an unlimited number of tax years.

Taxpayers can use the Interactive Tax Assistant tool on to figure out if they’re eligible for either of these credits.

More information:
Compare Education Credits
Publication 970, Tax Benefits for Education

Parents Can File Their Kids’ Tax Returns For Free Through

If your high school or college aged child needs to file a tax return only to have federal or state income taxes withheld from their pay refunded, then why not file for free? For federal taxes, this generally applies to dependents who earned no more than $12,550 (in 2021) unless they also have investment income exceeding $350.

Even if your child earns more than $12,550, if the only income is from W-2 wages, then please take advantage of the IRS’ free filing. Just be careful to check the box on Page 1 or their 1040 reflecting that the child can be claimed as your dependent or you might lose out on the valuable tax credit of $3k per child under the age of 17 (increased to $3.6k for kids 5 and under) or $500 per older dependent child.

While preparing your child’s tax returns, please consider contributing the lesser of your child’s gross wages or $6,000 into a Roth IRA for your child. Think decades of tax-free compounded growth on those contributions. The due date to contribute to an IRA for 2021 is 4/15/22.

If a child is filing a tax return to report significant investment income, however, the overly complex Kiddie Tax rules might deter even the most tax-savvy parents from trying to file for their kids using the free software.

And if you do have a working child who won’t earn more than $12,950 in wages during 2022, please instruct your child to claim Exempt on the new W4 form to avoid the need to file a tax return for that child next winter only to get a refund of federal taxes that didn’t otherwise need to be withheld. Here are the instructions for your child to claim exempt:

Exemption from withholding. You may claim exemption from withholding for 2022 if you meet both of the following conditions: you had no federal income tax liability in 2021 and you expect to have no federal income tax liability in 2022. To claim exemption from withholding, certify that you meet both of the conditions above by writing “Exempt” on Form W-4 in the space below Step 4(c). Then, complete Steps 1(a), 1(b), and 5. Do not complete any other steps.

Demystifying Crypto Currency

The IRS now requires that all individuals answer this question about cryptocurrency on the first page of their personal tax returns: At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?   According to the Form 1040 instructions:

If, in 2021, you engaged in any transaction involving virtual currency, check the “Yes” box next to the question on virtual currency on page 1 of Form 1040 or 1040-SR. A transaction involving virtual currency includes, but is not limited to:

  • The receipt of virtual currency as payment for goods or services provided
  • The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift
  • The receipt of new virtual currency as a result of mining and staking activities
  • The receipt of virtual currency as a result of a hard fork
  • An exchange of virtual currency for property, goods, or services
  • An exchange/trade of virtual currency for another virtual currency
  • A sale of virtual currency
  • Any other disposition of a financial interest in virtual currency.

Due to this reporting requirement, we now ask each of my clients during our tax prep meeting whether during the year they purchased, sold, or otherwise acquired any virtual currency, including bitcoin. The response we get is usually one of the following three questions:

  • Have you?
  • Should I?
  • How can I invest in something I don’t understand?

To learn more about Cryptocurrency, check out Alex Oliver’s recorded Webinar available at:

In his webinar, Alex addresses that a diversified portfolio has long included various types of assets that range from large, mid-sized, and small companies, to value versus growth-oriented businesses, to various sectors within the economy, fixed income, commodities, and much more. With the total market capitalization of cryptocurrencies rising from $1 trillion to $3 trillion in 2021, is it time to add crypto assets to your IRAs, Roth IRAs, and investment accounts? If so, what percentage of your portfolio is appropriate? Which avenues are the best ways to invest? Join Alex Oliver in a quickly evolving discussion around one of the hottest topics in the investing world.

IRS Assistance Centers – Saturday Walk Ins

This tax season, the IRS is having special Saturday hours at many Taxpayer Assistance Centers (TACs) nationwide.

No appointments are required. The selected TACs will be open from 9 a.m. to 4 p.m. on the following Saturdays: March 12, April 9, and May 14.

The assistance centers are designed to help taxpayers get the help they need to file returns.  This year, they can be especially helpful to people reconciling advance child tax credit payments or those filing directly for themselves using the IRS Free File:

For a list of Centers that will be open on specific dates, please go the IRS website here  and select the date drop down to search


Start the 2022 tax year off right by checking your withholding

From IRS Tax Tips – 2022.27:

One way people can get the new tax year off to a good start is by checking their federal income tax withholding. They can do this using the Tax Withholding Estimator on

This online tool helps employees avoid having too much or too little tax withheld from their wages. It also helps self-employed people, who have wage income, estimate tax payments that they should make to avoid unexpected results at tax time. Having too little withheld can result in a tax bill or even a penalty at tax time. Having too much withheld results in less money in their pocket. The estimator can help them get to a balance of zero or a desired refund amount.

Taxpayers can use the results from the Tax Withholding Estimator to determine if they should:

The Tax Withholding Estimator asks taxpayers to estimate:

  • Their 2022 income.
  • The number of children they will claim for the child tax credit and earned income tax credit.
  • Other items that will affect their 2022 tax return when they file in 2023.

The Tax Withholding Estimator does not ask for personally identifiable information, such as a name, Social Security number, address, and bank account numbers. The IRS doesn’t save or record the information entered in the Estimator.

Before using the Estimator, it can be helpful for taxpayers to gather applicable income documents including:

These documents are not needed to use the estimator but having them handy will help taxpayers estimate 2022 income and answer other questions asked during the process.

The Tax Withholding Estimator results will only be as accurate as the information entered by the taxpayer. People with only pension income should not use the Estimator. Those with wage income can account for current or future pension income. People with more complex tax situations should use the instructions in Publication 505, Tax Withholding and Estimated Tax. This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends.