The Flexible Spending Arrangements (FSA) is a program where you, the employee, can agree with your employer to have a certain amount withdrawn from your check each pay period that will be set aside for eligible medical expenses.
Your employer can also contribute to your FSA. The sums paid by the employer to your account are not taxable. Get additional details on fsa nondiscrimination testing irs through online sources.
The plan is easy to use. When you have eligible medical or dental expenses, you pay them out of pocket, as you always do. But then you send a statement to the FSA administrator requesting reimbursement of the expense.
You can find a full discussion of eligible medical and dental expenses in IRS publication 502, Medical and Dental Expenses. Refunds are tax-exempt, but you are not allowed to double-collect by claiming these expenses again on your schedule A when filing your income tax return.
To maximize this potential benefit, it’s important to monitor and track your spending on a regular basis so that you can see how much, each year, you are spending on expenses that might qualify for the FSA.
Your financial planner should work with you to regularly monitor your budget and ensure that you take advantage of tax savings opportunities like this. Obviously, careful planning for this problem can save you thousands of dollars.
Careless planning or a lack of knowledge can also cost you thousands of dollars. Why take the risk? Work with a qualified financial planner. A good planner should be able to save you more than the expense.