Your tax return has been submitted electronically to Federal and state taxing agencies. Your refunds have been direct deposited. Whew!! Now you can leave the mess of taxes alone until next April, right?? Wrong!
The tax “off season” is a great time to get organized in preparation of filing your 2015 tax returns due 4/15/16. Here are a few things to consider:
1. Did you incur costly out-of-pocket medical expenses that provided little or no benefit tax benefit due to the high threshold (> 10% of adjusted gross income) medical expenses have to exceed before they’re deductible?
If your health insurance carries a high deductible and meets certain other criteria, you could make tax deductible contributions to a health savings account (H.S.A.). Contributions TO a health savings account are deductible and distributions FROM a health savings account are non taxable to the extent distributions are used to pay for qualified medical expenses. You could now deduct those previously non-deductible medical expenses by diverting the money to a health savings account. For 2015 the maximum contribution to a health savings account is $3,350 for single coverage and $6,650 for family coverage ($4,350/$7,650 for taxpayers over 55). Here’s a quick list of eligible expenses that meet the definition of “qualified medical expenses” for purposes of H.S.A. distributions
2. Does the bulk of your income consist of W-2 wages for yourself and/or spouse? Did you receive a large refund or have a substantial balance due to the IRS or state? If so, now is the time to review your withholding allowances on Federal form W-4 and LA form L-4 (R-1300) for LA residents.
Maybe your traditional method of filing single with zero (0) withholding allowances (or something similar) has your employer withholding WAY too much throughout the year. Changing your withholding status (single vs. married) and/or the number of withholding allowances claimed could leave you with more money in your pocket throughout the year avoiding the long wait until tax time to recoup your over payment (essentially a loan to the government). Run a few scenarios with the payroll processor at your company to see what works for you.
Here are quick links to the current Federal and LA withholding forms.