Add to GuideAsk a Question
To Top

Using a Flexible Spending Account

Category Advice
Hand with Credit Cards
Flexible spending accounts are intended to help cover medical costs throughout the year. This is a guide about using a flexible spending account.
Ad

Solutions

Share on ThriftyFunThis guide contains the following solutions. Have something to add? Please share your solution!

Kelly Ann Butterbaugh0 found this helpful
August 21, 2006

Investment strategies and mutual funds are often over my head, but managing my flexible spending account (FSA) is easier than I planned and worth every minute of the effort.

Ad

What is it?

In layman's terms, an FSA is an account created to pay for medical needs. Money is deducted from your paycheck each week before taxes. When you spend money on a medical item such as a doctor's visit, you apply to have that money refunded to you from your FSA. Usually people consolidate the month's medical spending into one claim to the FSA, and they receive a check for the total amount.

Why do it?

The main reason for setting up an FSA is to pay less income tax. Since the FSA is deducted from your salary before taxes, it lessens your yearly income often putting you in a lower tax bracket. However, for those who have trouble putting money away, the FSA is a way to put a portion of each paycheck away and then receive it back by the end of the year as a large "bonus" check. There are no taxes paid on the money reimbursed from the FSA.

Ad

How do I do it?

At the end of the year most employers will open up the window to set up next year's FSA. In order to properly use the program you must assume your medical spending for the upcoming year. The best and most accurate way to do this is to keep the medical receipts from the previous year and add them. The company providing the FSA will provide you with a list of what constitutes an acceptable FSA withdrawal and what does not. Remember, you're tallying only what you pay out of pocket not the actual cost of the services. Use this checklist to help:

What should I watch for?

While the FSA is fairly easy, there is one major pitfall. You cannot have any of the money in the account refunded if it is not used. In other words, don't put more in than you'll use within the year. You must calculate carefully. My rule of thumb is that once I come up with a total I subtract $200 to find my total yearly contribution. Keep in mind that you can only claim expenses from the current year. When my company denied my claim for my monthly hospital payment for my son's birth the year before, stating that the date of service did not fall in the current calendar year, it looked like I would give Uncle Sam $600 that year.

Ad

With planning the FSA will become a fiscally safe account as well as a flexible spending account.

Comment Was this helpful? Yes

Questions

Ask a QuestionHere are the questions asked by community members. Read on to see the answers provided by the ThriftyFun community or ask a new question.

August 22, 20060 found this helpful

Today's poll asks: Do you have an FSA (Flexible Spending Account)?

Related:

Feel free to post feedback about this poll in the forum below.

Answer Was this helpful? Yes
Related Content
Categories
Budget & Finance AdviceJanuary 10, 2013
Guides
A smartphone being used to pay a bill online.
Using Bill Pay Features
Yahoo Mail
Troubleshooting Problems with Yahoo Mail
Overdrawn bank account.
Dealing With an Overdrawn Bank Account
Spending Money
Spending Money to Save Money
More
📓
Back to School Ideas!
😎
Summer Ideas!
Facebook
Pinterest
YouTube
Contests!
Newsletters
Ask a Question
Share a Post
Categories
Desktop Page | View Mobile

Disclaimer | Privacy Policy | Contact Us

© 1997-2017 by Cumuli, Inc. All Rights Reserved.

Published by .

Generated 2017/08/10 06:50:24 in 1 secs. ⛅️️ ⚡️
Loading Something Awesome!