Taxes

Asked and Answered: Any last-minute tips for FSA owners before tax day?

Tax day is here. If you're one of the 30 million Americans who did not withhold enough money throughout the year and now owe money to the IRS as a result, it's probably not the most festive time of the year.

But here's the good news — if you're also one of the 35 million Americans who have an FSA, then it's the perfect time to check on your account and make sure everything is up-to-date. After all, when you owe money (or narrowly escaped owing money!) every dollar counts.

Always speak with a tax professional to get proper advice for your own tax situation. But in the meantime, here's a few tips we find helpful when assessing our FSAs during tax season.

Don't worry about extra filing steps

First off, breathe easier knowing this fact: Unlike HSAs, which need to be reported on Form 1040, there are no reporting requirements for FSAs on your income tax return. There's one less thing to worry about!

But you do need to be wary of your deductions! Because you can't -- no matter how tempting it might be -- deduct qualified medical expenses if they were paid with tax-free FSA dollars. And that includes any money you forfeit at the deadline. If you have any unused cash in your FSA, since you already got a deduction, you can't deduct the loss.

Double check the rules

If you don't understand the unique rules for your FSA, then you may miss out on potential benefits like "run-out" periods, grace periods and rollovers. Because plan providers are not required to offer any of these perks, they vary from plan to plan. Take a few minutes to check in with your plan provider and brush up on the rules for your FSA. It's time well spent.

For most FSA owners, whose plan years end on 12/31, these extended deadlines have come and gone. But if your FSA operates on a different calendar, some of these perks might still be available to you, so you don't lose your funds.

To do: Check in with your human resources department and explicitly ask if your employer plan offers any of these three options for FSA users: "run-out" periods, carryovers and grace periods. (And make a note, so you don't fall into the same problem this time next year!)

File for reimbursement

Whether you have a "run-out" period and have expenses from last year or you have new expenses from this year, it's important to file for reimbursement with your employer. In fact, it's especially during tax season because it might mean that you get unexpected money from your FSA for eligible expenses that you've already purchased.

The process of filing for reimbursement varies from plan to plan, but it usually involves the following steps:

  • Knowing your deadlines. There's a deadline for when you'll need to submit any requests for reimbursement, so keep track of your plan details.
  • Then you'll want to gather your receipts. Whether it's for prescriptions, copays or eligible health products, you need to get organized.
  • Next, you'll file with your FSA provider. Usually, you will file for reimbursement online or through a mobile app. However, you might also be able to submit your claim my email or mail. As usual, it all depends on your plan.
  • Finally, you will want to track the reimbursement to make sure it's deposited into your account or cash the reimbursement check once you receive it. This is also the perfect time to note how much money you have left in your FSA for the rest of the year.

Take another look at your expenses

Now that you've gathered your receipts and filed for reimbursement, it's time to double-check your expenses. There are a lot of common expenses that you probably know are covered — copays for doctor visits, home medical items and even acupressure products to relieve pain — but there might be some expenses you made that you didn't even know were eligible. It's worth a second look.

To do: Skim through the FSA eligibility list to check for possible expenses that you missed.

--

From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Accounts

Asked and Answered: How should I handle my FSA when going through life and career changes?

A little-known fact: Your entire year's worth of allocated FSA funds is available to you on the first day of the plan year. So, even if you've only contributed a few paychecks' worth so far, if you need to use the funds for a larger qualified expense, you're able to do so -- you'll just "pay back" the account over the rest of the year through your already planned payroll deductions.

This is a great perk for those situations. But, life isn't a straight line, and sometimes things happen -- unexpected expenses, relocation, etc. -- that can get in the way of your planning and budgeting. If your life doesn't always stay on the straight and narrow, check out these tips to stay on target.

Consider lifestyle changes

If you're relocating to a larger, more-expensive city, you want to take into account a higher cost of living. For instance, let's say you're uprooting from Springfield, Missouri, to Brooklyn, NY. As the cost of living is nearly double in the Big Apple, you'd need to increase your salary two-fold to enjoy the same standard of living. Even if you're getting a bump in pay, you'll want to create a spending plan accordingly.

(Please note: If you switch jobs -- and health coverage -- your FSA stays with your employer. Any expenses you had prior to leaving are fine, but these funds aren't transferable, and don't "come with you" if you switch jobs.)

If you're expecting a lifestyle change like a move, you might want to use the funds in the FSA to help pay for out-of-pocket medical expenses. This way, more of your take-home pay can go toward your living expenses. Need to spend more on rent, bills, transportation and food? Then use the money in your FSA toward qualified medical supplies and other out-of-pocket health care costs.

Stay on top of eligibility

It's always good to know what's eligible -- and it changes pretty often (our "New Arrivals" section is a pretty good barometer for what's up). Just because something isn't considered preventive medicine last year doesn't mean it doesn't fall under preventative medicine this time around. By knowing exactly what's eligible, you can put the money that would otherwise be sitting in your FSA to good use.

Divvy up your funds

Figure out what your medical expenses might be for you and your family for the rest of the year. Then allocate the money in your FSA accordingly. How you want to divvy up the funds is based on your personal situation and different needs for each season. For instance, when will you need to buy supplies for medical conditions, or over-the-counter medication during flu season?

"End-load" your spending

If you're unsure of how much you'll need to spend on medical expenses throughout the year, figure out ways to spend whatever's remaining in your FSA in the last months. The max your employer can contribute is $2,700 within a plan year. So, since you'll have access to the full year's allocation at the beginning of the plan year, you'll want to figure out how much you can reasonably spend through each month.

Remember: if you don't use it, you'll lose it. If it's deemed necessary, get Lasik, pick up new prescription sunglasses, or be prepared with necessary health-related supplies and equipment. The beauty of online shopping is you can figure out what your grand total is before you check out. Whereas if you shop in a brick-and-mortar drugstore, you can only best guess how much you'll be spending. It'll keep you within budget, and prevent you from going over your limit.

If your life is prone to change, take full advantage of the fact that the FSA funds provided by your current employer are made available from the start of the year. When life throws you a curveball, knowing what's eligible, assessing any changes in your financial needs and living situation, and creating a spending plan will ensure you spend all the money before the end of the year.

--

From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.