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.
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:
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.