The Internal Revenue Service has advised that high-deductible health plans also known as HDHPs can pay for 2019 Novel Coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status.
This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account or HSA.
In Notice 2020-15, posted March 11 on IRS.gov, health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met, according to an IRS news release.
The IRS also noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.
The notice applies only to HSA-eligible HDHPs. Employees and other taxpayers in any other type of health plan with specific questions about their own plan and what it covers should contact their plan.
Other IRS Tax News
The Internal Revenue Service also announced the release of final regulations that increase the Offer in Compromise application fee to $205 and provide an additional way for the IRS to waive the Offer in Compromise application fee for low-income taxpayers, based on their adjusted gross income (AGI).
An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS to settle a tax debt for less than the full amount owed. Generally, it may be an option for taxpayers who can’t pay their full tax debt, or if doing so would create a financial hardship. The IRS considers the taxpayer’s overall financial circumstances when considering an OIC in an effort to administratively resolve the amount due, a news release said.
Applicants who meet the definition of a “low-income taxpayer” receive a waiver of their OIC application fee. A new provision from the Taxpayer First Act provides an additional way for low-income taxpayers to qualify for a waiver of the OIC application fee.
Usually, the IRS determines if taxpayers fall at or below 250% of the poverty level by looking at their household’s size and gross monthly income. The new law provides an additional standard for the IRS to use in making the calculation. The IRS will now also look at a taxpayer’s AGI from the most recent tax return to determine whether it is at or below 250% of the poverty level, the news release said.
Taxpayers with outstanding tax debt are encouraged to timely respond to IRS notices and should not ignore correspondence received from the IRS. Taxpayers with an outstanding tax debt should contact the IRS at the phone number set forth in the notice, online or by visiting a local Taxpayer Assistance Center (TAC) – a listing of local TACs is available at IRS.gov. Taxpayers may also seek assistance from the Taxpayer Advocate Service (TAS). Contact information for TAS is available online, including a listing of local TAS offices.