PR ANNOUNCEMENTS

Wilber Mendez Joins De La Hoz, Perez & Barbeito

Natalie Martinez Joins De La Hoz, Perez & Barbeito

Javier Casabona Joins De La Hoz, Perez & Barbeito

De La Hoz, Perez & Barbeito, P.A. Names New Positions for Senior Leadership Team

De La Hoz and Associates PA announce the formation of De La Hoz, Perez & Barbeito, P. A.

David G. Barbeito Joins De La Hoz & Associates CPAs as Director

MONTHLY NEWS UPDATES

An “Innocent Spouse” May Be Able To Escape Tax Liability & Plan Ahead For Health Savings Accounts In 2024

An “Innocent Spouse” May Be Able To Escape Tax Liability

When a married couple files a joint tax return, each spouse is “jointly and severally” liable for the full amount of tax on the couple’s combined income. That means the IRS can pursue either spouse to collect the entire tax, not just the part that’s attributed to one spouse or the other. This includes any tax deficiency that the IRS assesses after an audit, as well as any penalties and interest.

In some cases, however, one spouse may be eligible for “innocent spouse relief.” This generally occurs when one spouse was unaware of a tax understatement that was attributable to the other spouse.

Qualifying for relief

To qualify for innocent spouse relief, you must show not only that you didn’t know about the understatement, but also that there was nothing that should have made you suspicious. In addition, the circumstances must make it inequitable to hold you liable for the tax.

Innocent spouse relief is available even if you’re still married and living with your spouse. In addition, if you’re widowed, divorced, legally separated or have lived apart for at least one year, you may be able to limit liability for any tax deficiency on a joint return.

Election to limit liability

If you make the innocent spouse relief election, the tax items that gave rise to the deficiency will be allocated between you and your spouse as if you’d filed separate returns. For example, you’d generally be liable for the tax on any unreported wage income only to the extent that you earned the wages.

The election won’t provide relief from your spouse’s tax items if the IRS proves that you knew about the items or had reason to know when you signed the return, unless you can show that you signed the return under duress. Also, the limitation on your liability is increased by the value of any assets that your spouse transferred to you in order to avoid the tax.

An “injured” spouse

In addition to innocent spouse relief, there’s also relief for “injured” spouses. What’s the difference? An injured spouse claim asks the IRS to allocate part of a joint refund to one spouse.

In these cases, an injured spouse has had all or part of a refund from a joint return applied against past-due federal tax, state tax, child or spousal support, or a federal nontax debt (such as a student loan) owed by the other spouse. If you’re an injured spouse, you may be entitled to recoup your share of the refund.

Moving on

Whether, and to what extent, you can take advantage of the above relief depends on the facts of your situation. If you’re interested in trying to obtain relief, there’s paperwork that must be filed and deadlines that must be met.

Even if you’re not in need of any such relief now, as you file tax returns in the future, be mindful of “joint and several liability.” Generally filing a joint tax return results in lower taxes for a married couple. But if you want to ensure that you’re responsible only for your own tax, filing separate returns might be a better choice for you, even if your marriage is intact. Contact us with any questions or concerns.

Plan Ahead For Health Savings Accounts In 2024

The IRS has released guidance that includes the 2024 inflation-adjusted amounts for Health Savings Accounts (HSAs). HSAs allow taxpayers to save money for health care expenses in a tax-advantaged way. But contributions can be made only if the taxpayer has a high-deductible health plan (HDHP).

Employers that offer HDHPs can also offer HSAs as a way for employees to fund the high deductibles and other medical expenses pre-tax from their paychecks. (Employer contributions are optional.) Individuals with an HDHP who don’t have an employer-provided HSA, such as the self-employed, can set up their own HSA and make tax-deductible contributions to it.

What are the benefits?

The benefits of HSAs include the following:

Contributions are made on a pretax or tax-deductible basis.

Funds can be withdrawn tax-free to pay for a variety of medical expenses, such as doctor visits, prescriptions, and long-term care insurance premiums (up to applicable limits).

HSAs have no “use-it-or-lose-it” requirement. The full unused account balance can carry over from year to year, with no time limit on when it must be used.

HSAs are “portable,” meaning the account stays with the employee even if he or she changes jobs or leaves the workforce.

As noted earlier, to be eligible to contribute, an individual must be covered under a an HDHP (defined below). Participants in an HSA cannot be enrolled in Medicare or have other health coverage, though there are exceptions, which include dental, vision, long-term care, accident and specific disease insurance.

The annual HSA contribution limitation as well as the annual HDHP minimum deductible and maximum out-of-pocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for next year

In Revenue Procedure 2023-23, the IRS released the 2024 inflation-adjusted figures for contributions to HSAs, which are as follows:

Annual contribution limitation. For calendar year 2024, the annual contribution limitation for an individual with self-only coverage under a HDHP will be $4,150. For an individual with family coverage, the amount will be $8,300. This is up from $3,850 and $7,750, respectively, in 2023.

There’s an additional $1,000 “catch-up” contribution amount for those age 55 and older in 2024 (same as for 2023).

HDHP defined. For calendar year 2024, an HDHP will be a health plan with an annual deductible that isn’t less than $1,600 for self-only coverage or $3,200 for family coverage (up from $1,500 and $3,000, respectively, in 2023). In addition, annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) won’t be able to exceed $8,050 for self-only coverage or $16,100 for family coverage (up from $7,500 and $15,000, respectively, in 2023).

Questions?

HSAs can be beneficial to both employers and individual taxpayers. Contact your employee benefits and tax advisors if you have questions about HSAs.