IRS releases inflation-adjusted amounts for HSAs

By James W. Rahmlow The Daily Record Newswire In Rev. Proc. 2012-26, the IRS has provided the inflation-adjusted amounts for health savings accounts to be followed in 2013. The amounts are increased due to changes in the cost-of-living adjustment. HSAs can be maintained in connection with a high-deductible health plan (HDHP) defined under Code Sec. 223(c)(2)(A). For the 12-month period beginning Jan. 1, 2013, the annual contribution for an individual with self-only coverage under an HDHP is increased to $3,250 from a 2012 amount of $3,100. For family coverage, the annual contribution limit is $6,450 under an HDHP, which is increased from the 2012 amount of $6,250. Projected (not yet actual) Social Security wage base for 2013 The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Fund programs, through the Social Security Administration Office of the Chief Actuary, has projected that the Social Security wage base for 2013 will increase from the 2012 amount of $110,100 to $113,700 in 2013. While the rate is not official until later in the year, the board's projection is usually quite close. Interestingly, the board offers four recommendations for how the Social Security program could remain solvent during the next 75 years. Included in the recommendations was a suggestion to increase the combined Old Age, Survivors and Disability Insurance tax rate to 15.01 percent. For 2012, the combined rate is 10.4 percent. IRS employee buyouts Related to cost cutting, the IRS has confirmed that more than 1,250 employees accepted buyout offers and took early retirement in 2011. The number is significant as it is in excess of 1 percent of the approximately 91,000 employees. So far in 2012, the IRS has announced an additional 400 buyouts. While it is not yet known how many employees will take the offer, it is known that the buyouts were extended mainly to analysts, communications and support operations employees. Broker Reporting Delayed As it relates to debt instruments and options, the IRS has announced that it will delay the effective date of cost basis reporting from Jan. 1, 2013 to Jan. 1, 2014. Responding to requests by brokers and individuals, the postponed date is designed to provide a better opportunity to comply with the reporting of cost basis information as legislation in 2008 in the Emergency Economic Stabilization Act; specifically the customer's adjusted basis in the security sold and an identification of whether any gain or loss is long-term or short-term. The cost basis information will not be required for debt instruments acquired before Jan. 1, 2014, or options granted or acquired before Jan. 1, 2014. U.S. banks now required to report interest paid to nonresident aliens Continuing its attack on nonreported income, the IRS has issued a potentially contentious revenue procedure that will require U.S. banks and other financial institutions to report, presumably on a Form 1099, any interest paid on deposits to a nonresident alien. The requirement applies to payments received by residents of any country having a tax information exchange agreement with the United States. Compliance will be mandatory for any interest payments made on or after Jan. 1, 2013, and will be required of commercial banks, savings institutions, credit unions, brokerages houses and insurance companies. To address confidentiality concerns, the IRS has indicated that information will not automatically be exchanged with exchange agreement countries and that it will not provide information at all to countries that do not have adequate confidentiality safeguards. Filing tips for 2013 One of the requirements of the Patient Protection and Affordable Care Act required employers to report certain types of health care provided to employees on Forms W-2 starting in 2012. It is important to note that the amount reported should include both the portion paid by the employer and the portion paid by the employee. A very important deferral exception exists for the small business community. Specifically, any employer who is required to file fewer than 250 Forms W-2 will have the option of whether to report the medical payments information in 2012. It will not be mandatory reporting until 2013. The 2012 filing season is just behind us, yet the ever-forward looking IRS has issued a Tax Tips notice on www.irs.gov to provide taxpayers an opportunity to get a jump on the 2013 filing season. The suggestions focus primarily on organizational issues, but are a good refresher for anyone who struggled through the 2012 filing season. Below is a brief summary of those suggestions: * Set recommended withholding levels to match expected tax. The IRS website (noted above) provides a handy calculator to allow individuals to review their withholding and take into consideration changes in income, marital status or dependents. * Review pretax computations on paystubs to insure that the employer is following your wishes and elections. * Shop early on for a tax professional. While taxpayers are ultimately responsible for the return, a competent preparer can go a long way in easing the process. * Organize tax records. This one is obvious, but warrants noting that the organizing is a lot better if done contemporaneously. And * American Opportunity Tax Credit (AOTC) -- while many provisions are expected to sunset at the end of 2012, the IRS specifically mentioned the AOTC. This credit can be claimed for qualified educational expenses for the first four years of post-secondary education. ---------- James W. Rahmlow, a certified public accountant, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com. Published: Thu, May 31, 2012