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Save money with high deductible medical plans

May 15, 2012 by mrice

How High Deductible Medical Plans Save Money

If you’re like most employers, you’ve been squeezed by increasing premiums for health care benefits for yourself and your employees. Chances are, you’re on the lookout for ways to control those escalating health care costs while still providing your workers with the quality coverage for catastrophic care they need for themselves and their families. 

 

That’s where a HDHP/HSA plan comes in. 

 

HDHP/HSA Basics

HDHP/HSA stands for “high deductible health plan/health savings account,” an increasingly popular option among employers. In fact, about 17 percent of all employers have moved to offering HDHP/HSA plans for their employees in order to save money on health insurance premiums. Here’s how it works:

 

A high-deductible health plan saves on insurance premiums by having employees pick up more of the cost of routine medical care and small emergencies. Since truly major medical events are still comparatively few and far between, a higher deductible goes a long way to helping to control insurance premiums for workers and their employers. Currently, the law requires these plans to set minimum annual deductibles of $1,200 for individual plans, and $2,400 for family plans.

 

Contributing to an HSA

To help offset the burden of higher deductibles, though, the law also allows those who have a qualified HDHP to contribute pre-tax dollars to a health savings account. Any contributions grow tax free, and can be withdrawn tax free to pay for qualified medical expenses. The catch: Any withdrawals for any purpose other than to pay for qualified medical expenses are subject to income tax and a penalty of 20 percent.

 

As an employer, you can also match your employee contributions to their own HSA. As of 2012, covered individuals can contribute up to $3,100 for individual plans or $6,250 for family plans each year. though a 20 percent penalty, plus income taxes, applies to withdrawals for any other purpose.

 

Qualifying

Not everyone can qualify for an HSA. To contribute, you must first own or be covered by an HDHP. You cannot qualify for an HDHP, however, if you also qualify for a traditional major medical plan. 

 

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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

 

Filed Under: Doing business

Put it in writing!

May 10, 2012 by mrice

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

The Importance of Written Agreements

While a gentleman’s agreement might be good in theory, generally it is best to avoid this type of agreement as a business owner. Friendship is wonderful, but business is business. Business owners who operate without written agreements may find themselves at substantial risk.

 

Clarifying Expectations

When you enter into an agreement to provide services, a written agreement serves as a model for defining the responsibilities of each party. Without a written agreement, if a dispute arises, you may find yourself providing services that are beyond your original expectations. Let’s face it, time is money and if you have to spend additional time providing unexpected services, it may cost you significantly.

 

Payment Expectations

Written contracts leave no room for error on payments. When an agreement is verbal, there may be disputes regarding when payments are made and how much those payments are. Removing any doubt about payment is a crucial component of a well-written small business contract. A written contract also means that if a dispute about payment arises, you have recourse through legal channels.

 

Disagreements Cause Losses

When you fail to have a written contract with a client or provider, you stand a greater risk of losing time and money. Not only will you find yourself in a “but I said…” situation, you may not have any opportunity to recoup funds that are due to you. 

 

Small business owners should think carefully about accepting any client without a written agreement. While it may initially seem that a handshake is all that is needed to secure the deal, problems may occur later that will cause deep regret. Work with your clients closely, establish a firm policy of working with a written contract and spell out all of the details of your agreement. Should any disagreements occur after the signing of a contract, you will have a written document that proves what everyone agreed to originally. 

 

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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

 

Filed Under: Doing business

Personal guarantees, should you or shouldn’t you?

April 29, 2012 by mrice

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Personal guarantees: should you sign?

Forming a corporation or a limited liability company is one of the smartest things you can do to protect your personal assets. In general, if a company can’t pay its bills, its creditors can’t force the company’s owner to pay its bills — unless the company’s owner has signed a personal guarantee.

Signing a personal guarantee is like co-signing a business loan. A personal guarantee is a legally binding promise to repay a business debt from your own personal funds if your company is unable to pay it. Signing a personal guarantee means that, when it comes to the creditor on the guarantee, you cannot rely on the fact that your business is an LLC or a corporation to avoid paying that creditor. In some ways, a personal guarantee undoes the protections that you put in place when you set up your business as a corporation or an LLC.

If your business defaults on a loan that you personally guaranteed, your personal assets may be at risk. A creditor can sue you personally for the company’s outstanding debt. If you lose, the court can enter judgment against you personally, and your bank accounts — even joint accounts — may be levied, your wages may be garnished and your property may be seized. Retirement accounts, Social Security income and disability income are usually safe, but other assets are not.

A personal guarantee is so risky, you may wonder why any small business owner would sign one. The answer is simple: many lenders require them. Lenders understand the risks of doing business with a corporation or LLC, so they often require one or more of the major shareholders in a business to personally guarantee a loan, a line of credit or charge account. Small business owners have no choice but to sign a personal guarantee if they need to borrow operating capital or order inventory or other goods on credit.

Small business owners should understand the risks of signing a personal guarantee and make an informed decision before signing. A personal guarantee may be unavoidable if a business owner needs to buy goods or services on credit.

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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

 

Filed Under: Doing business

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