Check Your Flexible Spending Account Balance

Source: Thefuntimesguide.com

Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.

Need to spend down your FSA? How’s about a colonoscopy?

A Flexible Spending Account (FSA), created in 2003 under President George W. Bush, allows you to contribute an amount you designate to a special account for your use for qualified health care expenses for yourself, your spouse, and your dependents. Your contributions to your FSA are funded with pre-tax dollars, and therefore are not subject to income or social security taxes. Therefore, if you are in the 25 percent tax bracket, your Federal savings are $250 for every $1,000 you contribute. If your contribution is $5,000, your Federal savings are $1,250.

Point 1: If your employer has not adopted the two-and-a-half-month grace period (to March 15), you only have until December 31 to clean out your account, or you will forfeit any remaining money.

Point 2: For 2013, the Congressional contribution limit is only $2,500 per employee per year. Therefore, depending upon your employer’s max, contribute as much as you can for 2012, and maximize this great benefit.

Actions to Take:

  • Make your child’s orthodontia appointment now.
  • If you’re a child on the other end, have your denture check-up.
  • If you’re not sure where you are, get your teeth cleaned again, it won’t hurt.
  • Have your annual physical exam, including your stress test, cholesterol check, etc.
  • Acupuncture and chiropractic therapy is allowed.
  • Have an eye exam, get new glasses or contact lenses (or an extra pair); Lasik eye surgery is ok.
  • Don’t forget a hearing exam, and don’t forget to buy some extra hearing aid batteries.
  • Prescriptions — buy a 90-day supply.
  • Buy or refill the first aid kit, ice packs.
  • Buy medical equipment, such as blood-pressure monitors (needed around April 15), thermometers, body braces. Also, doctor-prescribed treadmill or stationary bike (and no sales tax under these conditions).

Non-Qualifying Expenses:

  • Insurance premiums; Long-term care premiums.
  • Cosmetic procedures (teeth whitening); Sex-change operation
  • Drugs not prescribed by a doctor (Prescription drugs for male-patterned baldness not allowed)
  • Over-the-counter medicines not prescribed by a doctor.
  • Medicines and drugs from other countries (unless approved by the FDA).

FSA Loan

Hopefully, you won’t need it, but you can use your FSA account even before you contribute. You are allowed to submit your out-of-pocket expenses for repayment against your promise to pay into the account. For example, you elect to contribute $2,400 for the year with a $200 per month payment from your paycheck. In February you incur a large medical bill of $2,400. Federal regulations say you can get the cash in February and continue your contributions. Of course, if you leave your job before repayment, that’s considered additional income to you.

For more qualifying expenses, check out my article “Not-so-Common Medical Expenses,” IRS Publication 502 [PDF], the “FSA store” on Drugstore.com, and Payflex.com.

Have a good week.

Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.