Money Matters - Year End Tax Planning: Flexible Spending Accounts
BOSTON (CBS) - I know the holidays are on your radar screen right now, but there is still time to do some tax planning for 2010.
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Let's start with Flexible Spending Accounts (FSAs) sometimes called cafeteria plans or section 125 plans which have over 20 million employees enrolled. Flex Accounts are a benefit offered by many employers whereby you set aside part of your income pre-tax to these accounts.
You can use the dollars for either medical expenses or childcare through out the year. Usually you are allowed to contribute up to $5,000 for childcare and $3,000 for medical expenses. Employer plans do vary.
You will lose any money remaining in your account at the end of the plan year, but you may have until March 15 of 2011 to spend it. You have until May 31 of 2011 to file claims for reimbursement of eligible expenses incurred.
According to Mercer Consulting over $400 million was left in these plans last year. So take a look at what's left in your account and make plans to spend it. If there are dollars left in the childcare account that's easy pay for January and February now.
Next, review the medical account. The IRS has expanded the number of allowable procedures and over the counter drugs you can pay for with an FSA. But come January 1, 2011 the rules are going to change again.
Many over the counter medicines will require a prescription from your doctor if you want to be reimbursed. Such things as aspirin, cold medicine and cough syrup will require a prescription. Check with your employer or go online to FSA Store for some help. I can't imagine how the doctors are going to feel about writing a prescription for aspirin!
There are some things you can do right now to use some of the dollars in your account.
- Schedule your annual check up if it is not covered by your health insurance plan
- Pre-pay the kid's orthodontist for their braces
- Get your teeth cleaned, get the kids to the dentist over school vacation as well
- Pre-pay your dentist if you are having dental work such as implants or crowns
- Get an eye exam, an extra pair of glasses or prescription sunglasses
- Lasik eye surgery which is normally not covered by insurance
- Weight loss programs – here you need a note from your doctor that you need to lose weight to treat a specific medical problem such as diabetes or high blood pressure, pre-pay the membership fees
- Want to quit smoking – same route get a doctor's note and pre-pay the program fees
- Stock up any over the counter (OTC) drugs you use normally such as Claritin and aspirin
