See The Savings From A Flex Plan
Wednesday - November 26, 2008
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By: Milad Estivan, CEO/Member, Pan Pacific Laser Vision Center, LLC. (Since 1997)
Did you know you can save up to 40%? If not, let me explaine how: A Flexible Spending Account (FSA), are one of a number of tax-advantaged financial plan that can be set up by your employer. FSA’s allows an employee to set aside a pre-taxable earnings to pay for qualified expenses as set by the employer. Most often these are for medical expenses, but can include dependent child care expenses, etc. Money deducted from an your pay into an FSA is not subject to payroll withholding taxes. As a result your net taxable income is less!
The most common FSA available are for medical or dependent care expenses.
Medical expense FSA
This type of FSA is used to pay for medical expenses not covered by their health insurance; this includes items such as deductibles, co-payments. Glasses, contacts and laser vision correction would also fall under this category.
Dependent care FSA
FSAs can also be established to pay for certain expenses related to care for dependents that live with you while you are at work, the most commonly means used are child care, etc.
The FSA is federally capped at $5,000 per year. While married spouses can each elect to have this amount deducted from their paycheck and applied to expenses, at tax time, all withdrawals in excess of $5,000 are taxed. Unmarried couples can each deduct and use $5,000 or a total of $10,000.
An FSA may be utilized by paper claims or an FSA debit card also known as a Flex card
Two important things to know about FSA’s:
One major drawback is that the set aside money must be spent within the coverage period as defined by the benefits plan. The “plan year” is commonly defined as the calendar year.
Any money that is left unspent at the end of the coverage period is forfeited back to the company; this is commonly known as the “use it or lose it” rule.
An FSA’s coverage period ends either at the time the “plan year” ends for your plan or at the time when your coverage under that plan ends.
Example: Loss of coverage due to a separation from the employer.
This means that if you are employed by a company from January through June and covered on their benefits plan (including FSA) during that time, but do not elect and pay for continued coverage under that plan (i.e., COBRA). Your coverage period is defined only as January through June, not January through December as one might think.
In this example, all covered expenses must be incurred between January and use it or lose it by June of that year.
A second requirement is that all applications for refunds must be made by a date defined by the plan. If funds are forfeited, this does not eliminate the requirement to pay taxes on these funds if such taxes are required. For example, if a single parent with children elects to withhold $5000 for child care expenses, but then gets married to a non-working spouse and no longer needs to spend for child care. If this person did not submit claims for refunds or use by the required date, the remaining amount would be forfeited AND taxes would still be owed on that amount.
Also, the annual contribution amount must remain the same throughout the year unless certain qualifying events occur, such as the birth of a child.
When considering Laser Vision Correction, you must make sure that you qualify for the procedure before filing. You simply need to call us and schedule for a free consultation to find out if you are a suitable candidate first.
For more information, please call us at 949-9200 and ask for our Refractive
Consultants to assist you.
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