Flexible Spending Accounts (FSAs) give you an opportunity to save on taxes by paying for eligible health care and dependent day care expenses with pre-tax dollars. There are two types of accounts – the Health Care FSA and the Dependent Day Care FSA. Both are administered by WageWorks.
How Flexible Spending Accounts Work
Ordinarily, you pay for unreimbursed health care and dependent day care expenses with after-tax dollars. The FSAs allow you to pay for certain expenses with pre-tax dollars. Because the money you save is deducted from your pay before federal and, in most cases, state income taxes, using these accounts lowers your taxable income. That means you pay taxes on a lesser amount of money.
Because you gain tax advantages when you use these accounts, the IRS puts certain restrictions on how they work. If you do not use all of the money you deposit during the Plan’s designated timeframe – during the calendar year – the IRS requires that you forfeit the unused balance and they cannot be refunded. Per Plan guidelines, your unused contributions cannot be rolled over into the next year. However, if you plan carefully, you can take advantage of the tax savings without worrying about leaving a balance in your account.
The Health Care and Dependent Day Care FSAs are separate. You cannot use your health care account to pay for dependent day care expenses, or vice versa. You must keep copies of your receipts for substantiation purposes by WageWorks or in case of an IRS audit of your FSA expenses.
The plan year for both FSAs is the calendar year (January 1 – December 31). All expenses must be incurred during the plan year, but you have until March 31 of the following year to submit your claims.
|FLEXIBLE SPENDING ACCOUNTS: MINIMUM AND MAXIMUM ANNUAL CONTRIBUTIONS|
|Health Care FSA||Dependent Day Care FSA|
|Maximum||$2,600||$5,000 ($2,500 if married and filing separate returns)|
You can obtain information about your FSAs by calling WageWorks at 1-877-924-3967 or by visiting http://www.wageworks.com.