Taxes
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By In Taxes

It’s Tax Day. Yay! Bleh.

I’ve been noticing that pretty much every day has some kind of designation now. Sibling day. Work-from-home day. Pizza day. Pie day. Laundry day?

But April 15 is and always will be Tax Day. Well, maybe not always but I’m a realist and don’t see any circumstances that might cause such a change in the tax system that we wouldn’t have an annual day to declare our income and figure out how much we get back/owe.

I know that it’s a big goal for some in the community to not pay taxes. I respect the goal but, while I’ll stop short of saying I’m a fan of paying taxes, I generally subscribe to Harold Pollack’s personal finance philosophy of supporting social safety-net programs. Those programs are paid with taxes, so there you have it. Maybe it’s too much to ask that we celebrate Tax Day but there is a silver lining to it.

But with that said, we also don’t want to overpay, right? Of course not.

Here are just a few things to remember for this Tax Day:

  1. There’s still an Individual Mandate: You may have heard that the individual mandate was “repealed.” Technically, it wasn’t — the tax that applies to the Individual Mandate was just set to $0, which basically means that even though you’re supposed to have health coverage, nothing’s gonna happen to you tax-wise if you don’t. Either way, that doesn’t kick in until the 2019 tax year, so you still need to provide a 1095-A, 1095-B, or 1095-C tax form. What’s the difference?
    1. 1095-A forms are for those who have coverage through a state or federal marketplace — Obamacare plans.
    2. 1095-B forms generally come from your health insurer if your employer is “fully insured,” which is most small businesses.
    3. 1095-C forms generally come from your employer if they are “self-insured,” which is the majority of large companies (like 1,000 or more employees).
  2. Even though you’re probably not going to have to pay for not getting health insurance, you still need good health insurance. Don’t bet on your invincibility and don’t buy bad insurance!
  3. If you have an HSA (or medical savings account, AKA MSA) and you’ve used the funds, either for qualifying medical expenses or not, you need to report that amount on your taxes. You should get form 1099-SA from your HSA bank. You may also need form 8889 to itemize your HSA funds for which you “took a distribution,” to determine how much you owe in taxes if any of it was not a qualifying medical expense and to prove to the IRS that you don’t owe additional taxes if the expenses qualify. Here’s more information from TurboTax.
  4. If you don’t have an HSA or you aren’t taking a distribution (i.e. paying for medical expenses) from your HSA, you can still deduct medical expenses equaling up to 7.5% or your adjusted gross income. (This amount goes to 10% for the 2019 tax year and beyond.) There are a lot of different types of things you can deduct that look a lot like the qualifying expenses list for HSAs and FSAs. Here’s a helpful link from H&R Block.

So there you have it. Just a few quick tips to get through Tax Day with a yay instead of a nay. Don’t leave any money on the table, people!

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By In Around the Web, Health Savings Accounts (HSAs), Taxes

Advice on Handling HSAs on your Tax Return

Here’s a thorough article from the New York Times “Your Money Adviser” column on how to handle health financial accounts like HSAs and FSAs on your income tax return. It includes details about annual limits and what you need to claim expenses. My one criticism is the “But Beware the Paperwork” in the headline. If you are paying for medical expenses on your HSA card, your HSA sponsor bank will mail you a ready-to-submit form, just like a W2 or 1099. If you are tracking your expenses yourself, it is more work but not too cumbersome if you create a manila folder and just make sure to save your receipts. Either way, definitely don’t leave money on the table for medical expenses come tax time!

From the New York Times: “Health Saving Accounts Can Reduce Tax Bills. But Beware the Paperwork.”

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By In Budgeting, Do the Math, General Benefits Knowledge, Money-Saving Tips, Savings, Savings and Budgets, Student Loan Debt, Taxes

How to Identify Your Scarcities and Use Them to Your FI Advantage

Recently, at a PTA meeting for my daughter’s school, the school’s two parent-volunteer yoga instructors gave a short presentation (with student participation) on the easy yoga and meditation techniques they practiced with our kids. It was fun, funny and heartwarming to see the kids really get into their practice. It was also illuminating for us as parents to try it ourselves. When it got to the mindful meditation part, one of the instructors mentioned how focusing on your breath opened a path to the amygdala, which “will get you off of the treadmill of worry and into relaxing mindfulness.” I used to find these types of descriptions a little silly, but the more I’ve tried to be more mindful in my own daily life, the more I can buy into this idea of needing a real shift in mindset to get from worry to deeper conscience.

It reminded me of a book I read last year called Scarcity: The New Science of Having Less and How It Defines Our Lives. It’s a wonderful book that can impact the way you approach both personal and professional challenges. It’s more of a research-oriented book than self-help, so don’t go into it expecting to get a blueprint for finding mindfulness. It’s more about the research the authors did on how scarcity impacts how we think and make decisions — and it really does.

As you seek financial independence, chances are you are making plans that are deeply impactful to the two most common forms of scarcity: money and time. You’ll want and need to ensure that you’re making the most of both to reach your FIRE goals. But you’ll also want to make sure that you understand when you’re making decisions based on a scarcity of one or the other, or both, and what you can do to work against making bad decisions.

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