taxes

Use or lose your flexible spending account

December is a hectic time, but there's one tax task you can't overlook in the holiday rush. If you have a medical flexible savings account, or FSA, you need to check its balance and make sure you don't end up wasting that money.

These workplace-provided accounts are popular for a couple of reasons.

First, you can use the account money to pay for items and services that aren't covered by your health insurance.

Second, the saving process also saves you tax dollars. You make FSA contributions via regular, equal payroll deductions. The amounts are taken from your paycheck before your withholding taxes are calculated, so you owe a bit less in federal income and Social Security taxes upfront.

But the accounts have one drawback. In many instances, if you don't use the money by the end of your benefits year, which for most people is Dec. 31, you'll lose it.

Check your deadline

In some cases, however, the year-end deadline isn't firm. The Internal Revenue Service allows employers to give FSA owners until March 15 of the following year to make eligible medical expenditures and pay for them with account money. But the grace period is optional. Companies can offer it or not.

So your first step is to check with your benefits office to confirm your spending deadline, says Bart Turney, director of Public Sector Solutions at ADP Establishes Strategic Advisory Services in Louisville, Ky.

If your workplace gives you until mid-March to incur FSA-eligible expenses and use this year's funds to pay for them, you have some breathing room.

Companies now also have the option of allowing employees to roll up to $500 in unspent FSA funds into the next benefit year.

However, both those choices are optional and at the employer's discretion. If your spending deadline is the end of December, start making doctor appointments and buying allowable medical items now.

Eligible FSA expenditures

The most common uses of FSA money are to pay insurance copays and exams that aren't covered under your insurance.

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The holidays are a hectic time of year, but there's one tax-related task you can't overlook.

If you have a medical flexible savings account, or FSA, you need to check its balance and make sure you don't end up wasting that money.

FSAs are popular for a couple of reasons.

First, you can use the account money to pay for items and services that aren't covered by your health insurance.

Second, these workplace-provided accounts save you tax dollars. The amounts are taken from your paycheck before your withholding taxes are calculated, so you owe a bit less in federal income and Social Security taxes upfront.

But FSAs have one drawback. If you don't use the money by the end of your benefits year, you'll lose it. For most people, that deadline is Dec. 31.

So before the end of the year, use that money up. Maybe you need a vision exam, an extra pair of glasses, or a dental checkup. Make that appointment before January 1.

Vision exams are popular during this time of year. Most of us could use an extra pair of glasses or, for fun, prescription colored contact lenses. Don't forget about full dental checkups or even just teeth-cleaning appointments. Each of these expenditures could help you draw down your FSA.

Under many plans, FSA cash also can be used for alternative treatments, such as acupuncture or chiropractic sessions, that aren't typically covered by medical insurance.

It's also a good time to think about wellness exams and preventative procedures. "Anything you can do at the end of the year to help improve your overall health is a good use of account money," says Turney.

One easy wellness option is a flu shot, says Turney. Most pharmacies now offer these injections, so there's no need to make a special trip to your doctor's office.

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