Tax preparation and filing services cover the help people pay for each spring: tax software, a preparer who completes the return, or a consultation to sort out a new situation such as freelance income or a home purchase. For many households the cost is small but predictable. Employers include it because it takes one of the year's more stressful chores off employees' plates at a known time each year.
Tax filing costs commonly included
Plans usually cover the fee for preparing and filing an individual or household return. Simple returns usually just need software, while complex ones may need a preparer.
- Paid tiers of consumer tax filing software
- Fees for a preparer to complete federal and state returns
- State filing fees charged by tax software
- Consultations with a tax professional about a new situation
- Help filing an amended return
- Organizer or bookkeeping apps used to prepare a personal return
For the wider list of categories employers tend to include, see our guide to LSA eligible expenses.
Tax prep exclusions to define
- Taxes, penalties and interest owed are never LSA expenses.
- Returns for a separate business or side company are usually excluded.
- Representation in an audit or tax dispute may fall under a legal services category or be excluded.
- Refund advance loans and fees taken out of a refund are typically not reimbursable because there's no clear service receipt.
- Financial planning beyond the return itself, such as a full budget review, may belong in a separate advice category.
Employees who use tax prep support
Employees with more than a simple return are the heaviest users: people with freelance or rental income, those who moved states during the year, or anyone who sold stock from an equity grant. Newly married couples and first-time filers use it to get their first joint or solo return right. Employees who earn income in one country and pay tax in another also look for professional help. For everyone else, it simply covers the software fee. It also fits naturally alongside financial wellness benefits.
Designing a tax prep category
Time it with tax season
Most claims arrive between January and April. If your plan year follows the calendar, make sure prior-year receipts can still be submitted early in the new year.
Remind employees the LSA itself is taxable
LSA reimbursements are reported as income, which employees may notice on their tax forms. Saying this plainly in the plan guide prevents surprises at filing time.
Stay out of tax advice
Point employees to the preparer or software they choose. HR can explain what's reimbursable, but not how to file.
Frequently asked questions
Can I use my LSA to pay for tax preparation?
Many employers with a financial wellbeing category include it, though it depends on your plan. Tax software, preparer fees and consultations are the usual examples. Taxes owed and penalties are never covered.
Will my LSA reimbursement show up on my tax return?
LSA funds are taxable, so reimbursements are generally included in your reported income. Your preparer can explain how that affects your own return.
Can I claim the cost of filing my business taxes?
Usually not. Most plans limit the category to personal returns. Tax preparation for a separate business is typically a business expense instead.
What if my preparer takes the fee out of my refund?
Plans generally need a receipt showing the fee, and a deduction from your refund may not provide one. Ask your preparer for an itemized invoice or pay the fee directly.
LSA funds are generally treated as taxable income. Learn more about how LSA reimbursements are taxed.
This content is general information, not medical, legal, tax, or financial advice. Employer plan terms determine eligibility, and requirements may vary by location.
