Midyear tax tip #2:
Plan health care account moves
Tuesday, June 22, 2010
How are you feeling?
That's a question that can apply to the well-being of not just you, but also your workplace medical flexible spending account (FSA).
Melissa takes care of her FSA (and herself, too, I'm sure!) by reviewing her spending account now so she can begin planning how to use the funds so that she doesn't lose them.
Her advice is our second Midyear Tax Moves feature.
FSAs are a great employer-provided benefit. The money comes out of your paycheck automatically and goes into the spending account before you a have a chance to miss it. Even better, the contribution is made before any taxes are calculated, so the income tax amount withheld from your paycheck is a tad smaller.
Unfortunately, too many folks who sign up for an FSA don't follow Melissa's lead and they end up forfeiting some of their money at the end of the benefit year. That's because the one big drawback of these accounts is that they don't roll over from year to year. What you don't use, you lose.
Employers have the option to offer FSA account owners 2½ more months after the end of the benefit year to spend accumulated FSA funds. This is known as the FSA annual grace period, but it's not a requirement.
So now, while there's still lots of time, check with your benefits office and find out exactly when you have to use-or-lose your FSA money. Then, like Melissa, decide what medical services you can spend it on.
FSA changes coming: Taking full advantage of your FSA is even more important since in 2013 the amount you can put into the accounts will be limited to $2,500. There will, however, be annual inflation-based increases to the contribution amount.
And if you don't have an FSA, consider it. Mercer, a New York consulting firm, says that on average, only a third of people offered the tax-favored account take advantage of it.
Again, now is the time to talk to your employer and find out when and how you can enroll. \
It could be the perfect tax remedy for your health and health-care dollars.
More midyear tax tips on their way: Many thanks to Melissa for reminding us of how to maximize FSAs, a great workplace benefit.If you have a tax move we can make now to help reduce our upcoming 2010 tax bill, we'd love to hear from you. I'll be posting the tips, one a day until we run out.
If you're succinct, I'll take your tip
via Twitter @taxtweet.
Got a bit more to say, post it on the ol' blog's Facebook page.
And if you want a chance to win a New Yorker desk diary, check out the details here (the entry deadline has been extended to June 27).Related posts:
- Adding adult kids to health care, FSAs
- Spend your FSA
- Flexing your medical account muscle
- Tax-break relief for tax-induced headaches
- March 15 is FSA deadline for some
- Annual health care choice time
- FSAs: An Rx for Health Care Costs (AW magazine)
- Midyear tax tip #1: Welcome summer with energy-related tax breaks
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