Congress created one of the best tax savings vehicles in 2003. It wasn’t the individual retirement account (IRA). It wasn’t the Roth IRA.It was the health savings account (HSA). The HSA is the only tax-preferred savings vehicle in which a taxpayer potentially gets both an upfront tax deduction in addition to tax-free and penalty-free distributions. The IRS wrote the HSA rules to give taxpayers maximum flexibility in how they use their HSAs for medical expenses. Strategic use of the HSA can lead to lifelong tax savings opportunities. Let’s review the basic rules as to how an HSA operates, the little-known rules that create tax savings opportunities, and examples of how the HSA can be used to provide tax-free and penalty-free distributions when the taxpayer has a cash need.

Paying your income taxes is a fact of life for most taxpayers. The annual dance of gathering, reconciling, and reporting income/deductions/payments/credits (a.k.a. filing a tax return) keeps taxpayers and tax professionals hopping during each annual filing season and beyond. If you’re a W-2 employee, your employer takes care of your tax compliance by withholding and remitting federal, state, local, Social Security, and Medicare taxes from your salary. You may also have taxes withheld from pensions, unemployment compensation, gambling winnings, and other income. It may feel as if you’re not paying taxes because all you see is your net pay after taxes. Often it’s a direct deposit, and your payslips may be available only online. If you’re self-employed or have other income not subject to withholding, you prepay your taxes by making estimated tax payments. The traditional schedule for estimated tax payments is quarterly (4/15, 6/15, 9/15, 1/15). If not followed, steep penalties can exist, even if you pay them all by April 15. But some folks have trouble with the quarterly payment schedule, cash can be tight and that estimated tax payment money you’ve set aside might really come in handy. Happily, there are strategies to keep in compliance in a way that meets your budget and cash flow needs; and there are ways to avoid those late payment penalties. Want to know how? Keep reading to learn more.