You solely have just a few weeks to shut this well being fund. In the meantime, savers are shedding round $ 400 million yearly to unspent FSAs
Do you get cold and flu medication for the winter? Are you buying a Covid-19 home test kit? In this case, you will no longer have time to use this tax-privileged account for these purchases.
With flexible healthcare expense accounts that may be available at your workplace, you can save dollars before taxes and retrieve them tax-free for qualified medical expenses.
Save up to $ 2,750 in 2020 and 2021.
Although you can use the money as early as January 1st, you usually have until the end of the year to use your money – or you will lose it.
The IRS gives employers the choice of allowing employees to carry over some money into the following year – up to $ 550 for 2020 – or offering them to spend the remaining money up to 2½ months after the plan year ends.
Remember: your employer is under no obligation to give you either option.
Any unspent money goes to the employer where it can be used to cover plan costs.
“We know savers lose $ 400 million to $ 500 million in FSA funds each year because of consumer industry data,” said Rachel Rouleau, vice president of compliance for Health-E-Commerce, the parent company of FSAStore.com.
An extraordinary year
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With Covid-19 keeping so many people at home this year, it took many employees longer to use their overrun balances from 2019 – and they ran out of time to use the money.
Some employers offered flexibility to their savers in the face of the pandemic, including stopping the FSAs forbidding, said Ed Zollars, CPA and partner at Thomas, Zollars & Lynch in Phoenix and an instructor at Kaplan Financial Education.
The IRS issued a special relief in May that allowed plan administrators to allow workers to use up the funds carried over from 2019 by the end of 2020.
The added flexibility also applies to money in FSAs for dependent care. These accounts allow parents to save up to $ 5,000 before tax to cover childcare for children under the age of 13.
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Note, however, that your employer does not have to offer this relief.
In addition, there were no guidelines from the IRS on what will happen with the remaining funds from the 2020 budget year and whether there will be any further opportunities to push the money forward through 2021.
Savers face this mystery as Covid-19 cases keep spinning and the year comes to an end. Another round of shutdowns could mean the money isn’t going to be used again.
“When we get to the end of December, the IRS is likely to reiterate that in 2020 there will be people stuck with money and unable to cut contributions early enough,” Zollars said.
Find eligible expenses
A number of products are FSA enabled and you may not even have to leave your home to get some.
Covid-19 test kits you can use at home are a chargeable edition, as are infrared forehead thermometers and pulse oximeters – devices that measure your oxygen levels – according to Rouleau of Health-E Commerce.
Braces and aligners are also FSA-enabled if you were hoping to correct your bite at home. The same goes for prescription glasses, which are worth considering if you spend even more time in front of your computer.
The CARES bill, passed in the spring, added one more item to the list of eligible FSA expenses: feminine care products.
Virtual medicine, which is growing in popularity as a workplace offering, is also an eligible expense, according to Rouleau.
Certain issues require a medical necessity letter in order for you to access your FSA. This would include massage therapy, acupuncture, and chiropractic care.
Be aware of items that may but are not eligible for the FSA, such as: B. Masks and other devices designed to reduce the spread of the coronavirus.
To that end, Rep. John R. Curtis, R-Utah, proposed legislation this fall to include masks, surface disinfectants, and hand sanitizers as reimbursable medical expenses – at least until the end of the Covid-19 emergency period.
“Personal protective equipment is currently not eligible,” said Rouleau. “But we’re working to change that.”