A flexible spending account (FSA) is an employer-sponsored account that allows employee-paid expenses for medical or dependent care to be paid with an employee’s pretax dollars rather than after-tax income. Under a typical FSA, the employee agrees to have a certain amount deducted from each paycheck, and that amount is then deposited in a separate account called a flexible spending account. As eligible expenses are incurred, the employee requests and receives reimbursements from the account
Funds in a dependent care FSA account may be used to pay for the care of a de pendent younger than age 13 or the care of another dependent who is physically or mentally incapable of caring for himself or herself and who resides in the taxpayer’s home. Funds in a health care FSA account may be used to pay for qualified, unreimbursed out-of-pocket expenses for health care. The tax advantage of an FSA occurs because the amounts deducted from the employee’s salary avoid federal income tax, Social Security taxes, and, in most states, state income taxes, thereby allowing selected personal expenses to be paid with pretax (rather than after-tax) income. Paying the expenses with pretax dollars (money income that has not been taxed by the government) lowers taxable income, decreases take-home pay, and increases effective take-home pay because of the reimbursements. The maximum annual contribution limits are usually $5000 for dependent care FSA and $2000 to $3000 for medical care FSA. Younger workers who anticipate few medical costs usually do not sign up for a medical FSA, although FSAs do pay for eye glasses, contacts, copayments, and some
over-the-counter medications. Workers with children or others to
take care of financially, such as elderly or disabled parents, often
sign up for dependent care FSA. Only 20 percent of eligible
employees participate in flexible spending accounts even thoughdoing so saves money.
Funds in a dependent care FSA account may be used to pay for the care of a de pendent younger than age 13 or the care of another dependent who is physically or mentally incapable of caring for himself or herself and who resides in the taxpayer’s home. Funds in a health care FSA account may be used to pay for qualified, unreimbursed out-of-pocket expenses for health care. The tax advantage of an FSA occurs because the amounts deducted from the employee’s salary avoid federal income tax, Social Security taxes, and, in most states, state income taxes, thereby allowing selected personal expenses to be paid with pretax (rather than after-tax) income. Paying the expenses with pretax dollars (money income that has not been taxed by the government) lowers taxable income, decreases take-home pay, and increases effective take-home pay because of the reimbursements. The maximum annual contribution limits are usually $5000 for dependent care FSA and $2000 to $3000 for medical care FSA. Younger workers who anticipate few medical costs usually do not sign up for a medical FSA, although FSAs do pay for eye glasses, contacts, copayments, and some
over-the-counter medications. Workers with children or others to
take care of financially, such as elderly or disabled parents, often
sign up for dependent care FSA. Only 20 percent of eligible
employees participate in flexible spending accounts even thoughdoing so saves money.
Before enrolling in an FSA, you need to estimate your expenses carefully so that the amount in the FSA does not exceed anticipated expenses. According to Internal Revenue Service (IRS) regulations, unused amounts are forfeited and are not returned to the employee—a condition called the “use it or lose it” rule. However, employers may offer a 21⁄2-month grace period during which time you can continue to spend the previous year’s FSA money. Many employers offer debit cards that withdraw money directly from an employee’s FSA.over-the-counter medications. Workers with children or others to take care of financially, such as elderly or disabled parents, often sign up for dependent care FSA. Only 20 percent of eligible employees participate in flexible spending accounts even though doing so saves money.
Before enrolling in an FSA, you need to estimate your expenses carefully so that the amount in the FSA does not exceed anticipated expenses. According to Internal Revenue Service (IRS) regulations, unused amounts are forfeited and are not returned to the employee—a condition called the “use it or lose it” rule. However, employers may offer a 21⁄2-month grace period during which time you can continue to spend the previous year’s FSA money. Many employers offer debit cards that withdraw money directly from an employee’s FSA.
Making Decisions About Participating in Employer Life, Disability, and Long-Term Care Insurance Plans
Life, disability, and long-term care insurance coverage is often available through employers. While the premiums charged for the group of employees for life insurance are not as low as those available in the general marketplace, some employers pay for part or all of employees’ premiums. Coverage is typically one or two times the employee’s salary. So sign up for free or subsidized life insurance at work. The premiums for disability and long-term care insurance are often less expensive when purchased through one’s employer
Before enrolling in an FSA, you need to estimate your expenses carefully so that the amount in the FSA does not exceed anticipated expenses. According to Internal Revenue Service (IRS) regulations, unused amounts are forfeited and are not returned to the employee—a condition called the “use it or lose it” rule. However, employers may offer a 21⁄2-month grace period during which time you can continue to spend the previous year’s FSA money. Many employers offer debit cards that withdraw money directly from an employee’s FSA.
Making Decisions About Participating in Employer Life, Disability, and Long-Term Care Insurance Plans
Life, disability, and long-term care insurance coverage is often available through employers. While the premiums charged for the group of employees for life insurance are not as low as those available in the general marketplace, some employers pay for part or all of employees’ premiums. Coverage is typically one or two times the employee’s salary. So sign up for free or subsidized life insurance at work. The premiums for disability and long-term care insurance are often less expensive when purchased through one’s employer
.
0 comments:
Post a Comment