Are you getting the most out of your flexible spending account?
Medical expenses can be costly for individuals of all ages, income brackets and health conditions. Even those who are covered by insurance may find that their plans do not cover all their needs and that they alone are responsible for a large portion of their costs. Some employers lighten this burden by offering flexible spending accounts. However, many workers fail to utilize this benefit, which can lead to lost opportunities for savings. So before taxpayers start calculating their out-of-pocket costs, it's important that they understand how FSAs work and find out if their expenses are covered under their employer's specific plan.
An FSA is an account that can be used to cover medical expenses not included in a person's health insurance. The funds that go into this kind of account are taken out of a participant's paycheck on a pre-tax basis. However, the plans are provided under an employer's discretion, and the company typically decides how much can be contributed to these programs each year. It's crucial that workers think long and hard about how much of their income to devote to an FSA, because any remaining funds that are not utilized over the course of the calendar year are forfeited. This means that if an individual contributes $2,000 to an FSA for the calendar year 2012, and only uses $500, he or she will not be reimbursed the leftover $1,500.
Which type of costs qualify under an FSA?
Once a person decides to enroll in this program and settles on how much to contribute, it's also crucial that they fully understand which expenses are eligible under their employer's FSA and which are not.
Typically, workers are permitted to deduct co-payments and deductibles for medical and dental services not covered by their provider, as well as expenses that exceed the annual or lifetime limits allowable under their health insurance. In addition, patients may use an FSA to pay for vision care costs - such as contact lenses, glasses and cleaning solution - corrective eye surgery, hearing aids and batteries, weight loss programs to treat specific diseases, smoking cessation programs prescribed by a physician and special schooling for mentally or physically disabled dependents. In addition, prescriptions not covered by any medical plan and chiropractic services not included under an individual's specific health insurance program may also be included.
There are several health-related expenses that do not qualify, making it important for workers to speak with their employer and tax preparer to avoid confusion.
Liberty Tax Service (NASDAQ: TAX) has prepared over 2 million tax returns in 2012 alone and has over 4,100 offices in the United States and Canada. As the fastest growing tax franchise ever, Liberty Tax’s total revenues grew to $109.1 million last tax season. Liberty Tax stands behinds community enrichment efforts by sponsoring various non-profit organizations and urging their employees and franchisees to give back to their communities.
For a more in-depth look at Liberty Tax Services, visit http://libertytax.com or the Give Me Liberty! Magazine. Follow Liberty Tax on Facebook at http://facebook.com/LibertyTax<http://www.facebook.com/LibertyTax> and on Twitter at http://twitter.com/libertytax<http://www.twitter.com/libertytax> or check the blog at http://libertytax.com/taxlounge or contact Liberty Tax directly at 1-877-at-Liberty.