Businessolver Blog

Did Your Employees Make the Most of Tax Season? 

Did Your Employees Make the Most of Tax Season? 
Posted on Thursday, April 6, 2023 by Keith Soranno

W-2s, 1040s, and itemizing… tax season is finally coming to a close. With financial stress already high, this time can be hard on employees who may be unprepared.  

Financial literacy is at an all-time low. And with many Americans struggling to make ends meet, picking up second jobs to ride out inflation, tax season can be extra stressful.  

Will you owe a large chunk of change that accrues interest with each passing month? Or will you be seeing a large check in the mail with your name on it?  

Consumer accounts, like health savings accounts (HSAs) and flexible spending accounts (FSAs) not only help employees automate saving money for health expenditures, but also lead to a lower bill come tax season. While HSAs, FSAs, and HRAs all come with their own deadlines and eligibilities, they allow employees to designate a specific amount of money from each paycheck towards future health expenses.

Contributions made to HSAs and FSAs are pre-tax, meaning they’re not subject to federal income tax. So, the money set aside for these accounts can reduce an employee’s taxable income. On top of that, withdrawals made from HSAs and FSAs for eligible healthcare expenses are also tax-free unlike withdrawals from other saving and investment accounts. 

When dollars must go further to care for families, it’s essential to reduce tax liability.  

Financial preparedness, like having an emergency fund, can provide peace of mind in the event that you do owe money. Several benefits, like supplemental insurances and voluntary coverage, can help bolster financial security. Some offset costs directly or provide a financial buffer in the case of the unexpected. 

Certainly, premium dollars themselves lower taxable income, but here are a few other benefits that can specifically come in handy thinking about tax season: 

  • Retirement plans: contributions to 401(k)s and IRAs are tax-deductible. 
  • Tuition reimbursement: helps offset the cost of education and may be tax-free up to a certain amount. 
  • Dependent care flexible spending accounts: DCFSA contributions are made pre-tax and can be used to pay for eligible dependent care expenses, such as daycare costs. 
  • Tax advice: as voluntary benefits rise in popularity, some employers are offering tax prep services. 

For some tax season and the anticipated return can be a shopping spree. For others, it’s a time of dread, waiting to see how much they how and how quickly they must pay before incurring additional interest and fees. 

By promoting financial literacy and offering voluntary benefits, employers can help alleviate the stress of tax season for their employees and improve overall financial wellness. Investing in employee financial wellness, ultimately is an investment in your people and organization as a whole. 

HSAs and FSAs use a “set it and forget it” approach to prioritize employees’ most important expenses.