Tax Tip Thursday

We got some calls asking for more information after my post about Health Spending Accounts last week, and some of them were really good so I want to share them!

Carrying Balances Forward

One common question was about the ability to carry balances from one year to the next. This ability is determined by the administrator and the program you sign up for as an employer. Some of the Administrators provide this as an option while others may not. The CRA will allow you to carry forward for one year, but it ends there.

Beware the Tax Schemes

This is especially important if you are a sole proprietor of a business! For this to work, you MUST have at least one arm’s length employee. Some insurance brokers will sell you an HSA for your sole proprietorship saying that you will meet requirements as long as you also buy other insurance from them. This is not the case! Expenses will not be deductible if you do not have at least one arm’s length employee. It’s such a big issue that the CRA has even published a warning about it. Be careful!

Varying Fee Schedules

Take care to pay special attention to the fees that various companies will charge you. There could be a set up fee, an annual fee, then more fees for adding additional employees, then still more administration fees for every transaction! They add up quickly, and the last one is often a percentage of the size of the transaction.

Family Coverage

Some companies may have cheaper options for the employer that will look appealing. Be sure to read them carefully to make sure that you’re also covering your employee’s family! This can be a major sticking point for employees with dependants.

The Benefits of an HSA

There are loads of great benefits for both the employee and the employer if you get one of these. To name a few:

• Insurance — group benefits are always last year’s rates. HSAs use current rates
• They can work well when neither spouse has benefits or when one has minimal benefits
• They are a good opportunity to provide your employee with some benefits with a higher value as well as the opportunity to spend some pre-tax money on their family’s medical expense
• Depending on the fees associated, they can save you a few dollars as an employer too.

Learn More

Want to learn more about Health Spending Accounts to see if they’re right for your business? Check out last week’s post for more information or make an appointment to find out more!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.