Tax Tips
Clean Out Your Flex Account
If you have use-it-or-lose-it money disappearing on New Year’s Eve, it's time to spend, spend, spend.
By Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance
November 24, 2009
Advertisement
Still have money left in your 2009 flexible spending account? The most important thing you need to know is whether your employer’s plan operates under the old December 31 deadline or the increasingly common March 15, 2010, extension to spend the pretax dollars you set aside to pay for out-of-pocket medical and child-care expenses. If December 31 still rules, you’ve got to spend the money by year-end. If you miss the deadline, you forfeit the money.
Although you can use your health-care FSA for almost any health-related expenses that aren't covered by insurance, including deductibles and co-payments, at this late date you'll want to concentrate on stocking your medicine cabinet (both over-the-counter and prescription medicines count), scheduling routine dental and eye exams, and updating eyeglasses, contact lenses and prescription sunglasses. Generally, medically necessary costs qualify. Cosmetic procedures do not. So Lasik eye surgery is covered by an FSA. Liposuction is not. Yes to dental crowns; no to teeth whitening.
Related Links
- Set Next Year's Levels Right with our Calculator
- ASK KIM: What Happens to Your FSA if You're Laid Off?
- SPECIAL REPORT: Open Enrollment
However, if your employer has adopted the later, March 15 deadline, you could benefit from keeping some of the prior year’s funds in the account. For example, say $200 is left over from your 2009 account and you plan to buy a pair of prescription glasses that cost $300. If you wait until January to buy the glasses, you can cover the full cost with pretax dollars by submitting a $200 reimbursement claim to clean out your 2009 account and a $100 claim to draw the remainder from your 2010 account. The key is to incur the cost between January 1 and March 15, 2010. Most plans will you allow you an additional few weeks to submit your reimbursement request. Check with your plan administrator for claims-processing details and deadlines.
Discuss