The year’s end is quickly approaching, and with it rests the spending deadline of flexible spending accounts (FSAs). What is an FSA? A flexible spending account is an account that employees can use to cover out-of-pocket medical expenses completely tax-free. FSAs are built as employees make equal, recurring contributions from their paychecks to the account.
Why Have an FSA?
The advantage of having an FSA is that it is tax-free, budgeted money for medical expenses — a huge benefit if you anticipate significant medical care such as the birth of a baby, surgery, or any other expected out-of-pocket costs. Even without major expenses, it can still save you a good amount of money.
How does it works? You determine the total amount available in your FSA; this amount is then divided by your number of paychecks for the year. The resulting figure is withheld from each paycheck, pre-taxes.
So How Much Can I Save With FSA? Quite a bit actually. Here is a FSA Saving Calculator to help you figure out exactly how much you’ll be able to save.
How to Get Started with FSA
You can start your FSA by enrolling during your company’s open enrollment period. This almost always corresponds with when you can enroll for other benefits, such as your company’s 401(k) or health insurance plan.
Note: unfortunately, if you’re self-employed, FSA is not available to you.
Using Your FSA
As soon as you have an active FSA account, you can use the entire year’s balance as soon as you would like. If you use your entire FSA and for any reason leave your employment before the end of the year, you are no longer responsible for the remaining FSA paycheck deductions — your former employer will pay the balance.
But, and this is important, if you do not use the full amount of your FSA by the end of the year but you make your full payments, your employer receives the unused balance. In this way, FSAs benefit both the employees — by giving employees tax-free money that can be used immediately; and the employers — by giving employers remaining employee FSA balances at the end of the year.
The deadline for most FSAs — December 31 — is quickly approaching. Use your FSA before then or forfeit your balance to your employer. You could use your FSA to pay for:
- Birth Control — Includes condoms, birth control pills, and other forms of contraceptives.
- Contacts or Prescription Eyeglasses
- Dentistry …