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Friday, February 2, 2018

2016 Idaho Income Tax FormsWe've recently updated our website to reflect the new and updated Idaho tax forms you'll need to file your income tax returns with an Idaho Medical Savings Account.

The two main tax forms you'll need are:

If you're new to the Idaho MSA and aren't sure how to file, or if you're like me and need a quick refresher each year, check out our blog post we wrote that walks you through exactly how you file your income tax return.

We can't give tax advice, but we are more than happy to answer any questions you might have about how to file your return, as well as any questions you might have about the Idaho MSA in general.  Please feel free to contact our office (or have your CPA contact us) and we're happy to help you out!

Posted by idahomsa at 2/2/2018 6:08:00 PM
Wednesday, April 12, 2017

As more and more people learn about the benefits to an Idaho MSA and open accounts, the need for ongoing education becomes increasingly important.  This is exactly what we are here to accomplish, and is also the reason we wrote this blog post...to address the issue of over-contributions to your Idaho Medical Savings Account.  

Before we scare anyone with this, over-contributions certainly aren't the end of the world.  They can be both fixed and prevented (depending on circumstances I'll outline below), but they are definitely something you'll want to do your best to avoid.  

Now let's take a look at what it means to over-contribute, how this happens, what we can do to fix them, and what we can all do to prevent them from happening in the first place!

What Do You Mean...Over-Contribute?

Contributions to an Idaho MSA are capped annually, based on your tax filing status.  For single or individual tax filers, this annual limit is $10,000.  For joint tax filing households, this annual limit is $20,000.  So in a nutshell, putting more money into your Idaho MSA than you are allowed in a given tax year, is called an "over-contribution".

What's Wrong with Over-Contributing?

Any money you put into your Idaho MSA reduces your State taxable income, dollar-for-dollar.  That's great news, right?  That means you can save a significant amount of money simply by paying insurance premiums and medical expenses you have to pay anyway out of a different account (not your checking account, for example).  As a quick side note, if you're interested in seeing how much you can save with an Idaho MSA, check out our online savings calculator!

But back to what I was saying, the problem with over-contributing is that the State of Idaho will only let you place a certain amount of money into these accounts each year because they're not offering a free-for-all deduction party.  These accounts are designed to help Idahoans to afford the rising cost of health insurance premiums and medical costs, not to deduct groceries, vacations and vehicles.  Depressing, I know.

In addition, and what further complicates the matter, is that the money you place into the Idaho MSA earns tax-free interest on the State level.  This is another great benefit, but the State has a cap on this free money, based on the contribution maximums.

So the issue the Tax Commission has with over-contributions is really two-fold.  The first, is if you're obviously trying to deduct more money than you are entitled to.  That one is pretty obvious.  If you put anything over $10k or $20k on your taxes as an Idaho MSA deduction that's a first-class invitation to the audit party.  

But what if you don't try to deduct the full amount you put in that resulted in an over-contribution?  So if you put in $25k and only claimed $20k you're not trying to get a larger deduction that you're entitled to.  That doesn't hurt anyone and it's kind of a "no harm, no foul", right?  

Good attempt in theory, but this is where that tricky "interest earned" part comes into play to blow this strategy up, and subsequently brings us to the second problem the Tax Commission has with over-contributions: interest earned.

As we said above, the interest earned on your Idaho MSA contributions is tax-free on the Idaho level.  So if you've put more money than you're allowed to into an Idaho MSA, even if you don't claim the overage, you're still earning interest in an account based on money that shouldn't be in there, that therefore you are not entitled to.  So obviously, that's a no-go.

Does It Matter When I Over-Contribute?

Yes, it definitely matters not only when you over-contribute, but also how many times you over-contribute.  The timing and frequency will determine how difficult it's going to be to ultimately fix the issue.  Let's look at some examples to help illustrate this point.

Simple Over-Contribution:

Jim has deposited $20k in his Idaho MSA this year.  He files a joint tax return, so this amount is fine.  However, Jim makes a $5k deposit to his account in October, bringing his year-to-date contributions to $25k.  This is no longer fine.  Jim doesn't contribute any further that year, so when he goes to calculate his taxes he's going to need to make some adjustments to fix this, but it is not complicated to determine how he will fix this.  To see how to fix the simple over-contribution, see the section below.

Complicated Over-Contribution:

Jim has deposited $20k in his Idaho MSA this year.  He files a joint tax return, so this amount is fine.  However, Jim deposits $5k in June.  Then again in July, then again in August.  So now Jim's over-contributed 3 separate times resulting in $15k in overages.  This is obviously no longer fine, and Jim is going to need to make quite a few adjustments to fix this.  Due to the frequency in which he over-contributed, it will be a relatively complicated process to fix it.

Which brings me to our next topic, "What can be done to fix an over-contribution"?

What Can Be Done to Fix the Over-Contribution?

This answer can be broken down into two separate windows of time, based around the date in which you over-contributed:

  • Before 30 days has passed since you over-contributed
  • After 30 days has passed since you over-contributed

Before 30 Days Has Passed:

If you're in this camp, I have some great news!  All you need to do is simply contact our office and we can reverse the deposit.  It will be coded at the bank as a "deposit made in error", and it will not count towards your annual year-to-date amount.  As long as your year-to-date after the reversal is still under your allowed maximum for the year, problem solved.

After 30 Days Has Passed:

This is where things get complicated, because the option to simply reverse the contribution has been lost.  When you over-contributed, and how often you over-contributed will now come into play.

The entire goal of the exercise to follow, is calculating the interest earned on your over-contributed money that was not allowed.  

What you will need to do is go back and figure out when you first over-contributed to your account.  You will need to calculate the interest earned on your account from the date in which you over-contributed until December 31 of that tax year.  If you over-contributed more than once, you will need to calculate each and every time you did this, and it will be tiered.

So for example, if you over-contributed in June, again in August, and then again for a 3rd and final time in September, you calculate interest earned on the over-contributed funds from June-August.  Then you do it from August (including June and August's funds) to September.  Then you do it again (including June, August and September's funds) through the end of the year.

Once you have this number figured out, you will need to report it as income earned on your Idaho Supplemental Schedule Form 39R.  This is the same form you would normally use to claim your deduction.  In a case such as this where you over-contributed, you will need to be sure and report the full amount you contributed to your account, even if it is over the maximum allowed $20k.

Obviously, this can become a very difficult and time-consuming chore that you are going to have to do yourself, or pay your CPA's hourly rate to go back and figure it all out.  The frustrating thing about this is all of this is completely avoidable either by you monitoring your own account and being aware of the rules, or by utilizing our services to do this for you, automatically.  Which brings me to my last point.  This is avoidable!

What Can Be Done to Prevent Over-Contributions?

In short, being aware of how much you can contribute based on your own tax filing status and a little self-monitoring of your own money in your own accounts goes a long way.  But we completely understand this can be a complicated situation, and keeping track of rules and regulations for all these tax-deferred "alphabet soup" accounts can get a little confusing.  That is exactly what we're here for!

First and foremost, we have a unique and automated "Over-Contribution Monitoring" system in place that tracks every single dollar deposited to an Idaho MSA.  We know what your tax filing status is as well, so with those two pieces of information we can immediately determine when an over-contribution has occurred.  Within 24 hours we alert you to the problem, provide you with pre-filled out forms to correct it, and all you need to do is sign and return them.  Once we receive the forms we mail a cashier's check out and you're set! 

Further, we provide a running year-to-date on your montly bank statements so you always know where your account sits.  

We take these proactive steps as a courtesy to all of our account holders and it is the least we can do to help keep all of them in within the compliance guidelines before they find out there's an issue and it's too late to correct it.  As the saying goes, "An ounce of prevention is worth a pound of cure."

That's just a snapshot of some of the "behind the scenes" work we put into your account, and I can assure you that you won't find these services anywhere else in Idaho.

Questions or Comments?

If you've made it this far, we certainly appreciate you reading up on the "in's and out's" of Idaho MSA over-contributions.  We're quite passionate about the Idaho MSA, but we're even more passionate about our valued account holders!  

If you have any questions, comments or suggestions for future blog posts we're always happy to hear them.  There are so many nuances to these accounts and they are treated so many different ways by different individuals that there always seems to be another topic we can expand upon to help someone.  Feel free to contact our office and we'd love to hear from you.

As always, we appreciate your business and look forward to our next opportunity to serve you and your family's banking needs.  Have a great day!

Posted by idahomsa at 4/12/2017 9:07:00 PM
Wednesday, January 11, 2017

It's that time of year again, and as the Idaho MSA is quickly growing in popularity you may find yourself with one for the first time.  But how do you go about filing your taxes?

That's a fantastic question, and it's one we get frequently.  Although we are certainly not tax professionals, we do know a thing or two about how to report the Idaho MSA on the Idaho income tax forms.  Here's a quick instruction manual to help you report your Idaho MSA properly and get the deduction you deserve!  

Everybody who has an Idaho MSA is going to have to file the Idaho Tax Form 39R, the Idaho Supplemental Schedule.  Here's an image of Idaho Tax Form 39R, with some highlights we've made to help get our point across.

Idaho Tax Form 39R

As you can see in our highlights above, line 13 is the one that pertains to the Idaho Medical Savings Account.  If you have an Idaho MSA you'll need to fill in the 4 boxes that are asking for:

  • Total Annual Contributions
  • Interest Earned on the Account
  • Financial Institution that Holds Your Account
  • Account Number for your Idaho MSA

Line 13 then becomes part of your other deductions (if any), and that total will appear on line 23.  As the instructions say, take line 23 from this form and apply it to line 10 on your Idaho Individual Income Tax Return, Form 40.

That's it, you're done!  It's important to note here as we noted above, that we are not tax professionals and you should always consult an accountant or tax preparer to review your tax forms if you're not comfortable filing on your own.  This is just a basic guideline, but we think it will help most people looking to learn how to report their Idaho MSA contributions for deduction on their Idaho state income taxes.

As always if you have any questions, please don't hesitate to contact our office!  We appreciate your business and look forward to the opportunity to help.

 

Posted by idahomsa at 1/11/2017 3:58:00 PM
Wednesday, July 27, 2016

One thing we hear repeatedly from people we speak to is, "I can just deduct all my medical expenses on my Federal income taxes when I file.  What's the point of using an Idaho MSA if I can do that?"

That's a great question and we will certainly address it in this blog post.  However first and foremost, there is a major misconception among the general public when it comes to deducting your medical expenses from your Federal income.

We sat down with Tom Czarniecki, CPA of Czarniecki & Company to get the a straight answer on the in's and out's of medical tax deductions, so we could come back and explain the situation to everyone else in simple terms.

After speaking at length with Tom the fact of the matter is, you can only deduct what's over the threshold!  

Let's back up a minute here, for all of you who aren't CPAs and don't really know what I mean by "the threshold".  

The Threshold, Explained

In order to deduct your medical expenses on your Federal income tax return, you must meet "the threshold", which simply means you spent more than 10% of your adjusted gross income (AGI) on those medical costs.  So for a simple example, let's say you made $100,000 last year.  You spent $10,000 (or less) on medical expenses.  You cannot deduct a nickel.  Conversely, if you made $100,000 last year and you spent $10,100 on medical, you could then deduct $100, because that is over your 10% threshold.

Most people do not even come close to meeting this requirement, and therefore cannot deduct their medical expenses on their Federal returns.  So when trying to save money by seeing if you can deduct your medical expenses, this is usually where the road ends for most people.

For Everyone Who Doesn't Meet the Threshold

If this person is you, this exactly why you'd want to utilize an Idaho MSA.  This account allows you to deduct all of these medical expenses first dollar regardless of who you are, your age, what you make, or how much you spent on medical.  It's a simple line item deduction when you file, and it's a big one at up to $20,000 per year.  It isn't a Federal deduction, but 80% of something is always better than 100% of nothing.  Or as my Grandpa always said, "It's better than a poke in the eye with a sharp stick."

If you want to see how much you could save, check out our free Idaho MSA Savings Calculator!  Just punch in what you spend on premiums, dental, vision, prescriptions, etc. and it will automatically tally what you spend annually, plus show you what you can save on your taxes simply by routing that money through the Idaho MSA!

For Everyone Who Does Meet the Threshold

As for the other side of the coin, let's assume you are one of the lucky few making up the minority that does hit "the threshold".  Congratulations, but this is hardly a free-for-all deduction party. Here's the big kicker that 90% of the public doesn't understand, and as I mentioned above:  You can only deduct what is over the threshold.

Let that sink in for a second.  You've spent over 10% of your AGI for the entire year on medical costs, but you're not getting a deduction for one nickel that was part of that initial 10%.  You're only deducting everything that was over that first 10%!  For many people spending that much money, that's a huge piece of their income they're simply paying out-of-pocket and getting nothing to show for it in return.

So to back to our original question...why would someone who hits the threshold and deducts their medical expenses want to use an Idaho MSA?  That answer is quite simple.  In order to save money on the 10% you spent out-of-pocket that you're not able to write off, even though you have the ability to deduct what was over that amount!

If you're in this camp and you're wondering what that number looks like, check out our free Idaho MSA Savings Calculator!  Put in whatever amount equates to 10% of your AGI for the year, and the calculator will show you exactly what you'll save on that money as opposed to just paying it out-of-pocket and getting nothing in return.

A "No-Brainer", All Around

For the majority of people who don't meet the 10% AGI threshold, the Idaho MSA's a no-brainer.  You have no other way of deducting anything, so why would you not simply route the money you're spending on premiums and other eligible medical expenses through this account?  You'll be saving money on your State income taxes first dollar, all the way up to a $20,000 max per year.  

Even for those people who can deduct their medical, you're still losing out on every dollar up to that 10% AGI.  Using an Idaho MSA to pay your medical expenses is also a no-brainer for all of you, because it provides you a vehicle that allows you to recoup some additional savings on those dollars for which you would get nothing...even though you can deduct everything else above the 10% threshold!

Have Questions?  We Love Them!

Tax law is some complicated stuff and it's no surprise most people don't understand these rules and how they apply to their own individual (and often fluctuating) situation.  We're definitely not CPAs, but when it comes to the Idaho MSA and how you can best utilize it to your benefit we've got you covered.  We handle everything from the mundane to the extreme every day, so please don't hesitate to contact our office and we'll tell you exactly how an Idaho MSA can help you and your family save the most money possible on your healthcare costs.

To all our existing clients, we appreciate your business!  And to those we don't yet work with, we look forward to the opportunity to serve you.  Have a fantastic day and thanks for reading!

Posted by idahomsa at 7/27/2016 5:22:00 PM
Tuesday, August 18, 2015

One of the great features to your Idaho MSA is the incredible amount of access and convenience you quite literally have at your fingertips.  How is this, you ask?  Mobile banking!  

With mobile banking, you get 24/7 account access through all your iOS or Android devices like cell phones and tablets.  You can check your balance, view account history, transfer funds, pay bills...you can even deposit checks to your Idaho MSA using mobile deposit!

Take a couple minutes to check out the video below that outlines all the bells and whistles, and you'll be accessing your account from the palm of your hand anytime, day or night!

We hope you enjoyed the tutorial!  Be sure to check out all our other videos at the Idaho MSA Video Library, and let us know if you've got an idea for one as well!  Thanks for watching!

Posted by idahomsa at 8/18/2015 5:47:00 PM
Tuesday, August 11, 2015

Bill Pay is a fantastic free feature that comes with your Idaho MSA.  With Bill Pay, you can pay anyone electronically (either one time or recurring), set up reminders, track your history and so much more.  In order to take advantage of this program, you'll first need to set it up.

In order to make this process as quick and simple as possible, we've got a great video tutorial that goes over all the features and explains how to enroll in the program.  Check out the video below, and let us know what you think!

Posted by idahomsa at 8/11/2015 9:55:00 PM
Wednesday, November 19, 2014

Idaho MSA Video LibrarySometimes you just need to see something to believe it.  Or, perhaps you're one of those "visual learners" that loves to watch something work, as opposed to being told how it works.  At any rate, we've got some great news!  We've launched our Idaho MSA Video Library, which is a collection of some great video tutorials explaining different products and features on your Idaho MSA. 

"How To" topics like online banking, mobile deposit, bill pay, and electronic transfers are all covered.

In the future, we'll be posting educational videos explaining topics about Idaho MSAs like how they work, why they're a benefit and who can have one.

We're always open to suggestions, and we would love the opportunity to provide you with an answer to any question you may have.  Thank you for taking the time to check out our new Idaho MSA Video Library, and for the opportunity to earn your business.

Posted by idahomsa at 11/19/2014 7:14:00 PM
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