As we continue to fly through 2017, the new year will be here in a blink. With so many holidays, activities, and gatherings coming up, it can be easy to lose track of the more mundane, administrative tasks such as submitting claims to a Flexible Spending Account or requesting reimbursement from a Dependent Care Account. These types of accounts typically have a use-it-or-lose-it rule, so it is important to do a bit planning to not lose out on these benefits.
Flexible Spending Accounts
Many employers offer a Flexible Spending Account (“FSA”) to their employees in association with overall health care type benefits. With a FSA, money can be put into these special type of accounts to help pay for out-of-pocket health care type costs, such as dental, vision, co-pays, medications, etc. The money put into these accounts is not taxed, so there is a tax benefit associated with these accounts. Typically FSA rules require that all money put into the account during the year be used for medical type expenses. It generally does not roll forward for use in a future year. While some employers may have some type of grace period or carry over allowance, the majority do not. Now is the time to check the balance of your FSA and plan what types of medical expenditures you may have by the end of the year. Perhaps there is dental work that you need done, or a procedure or a test that you have been putting off. Maybe it is time to see the optometrist for some new glasses or contacts. While your calendar is likely already filling up, make time to do the necessary planning associated with any balance in your FSA account. It will be well worth your time for both your health and to not lose unused funds in the FSA.
Dependent Care FSA
Another type of FSA relates to dependent care. Funds put into a dependent care account can be used to pay for things like pre-school, summer day camp, before and after school care, child care or adult daycare so both parents can work. Like the FSA mentioned above, funds put into a dependent care FSA are also not taxed. It is important to get receipts from the care provider and submit these to the administrator of the dependent care FSA by year end to be reimbursed. While some dependent care plans may have a grace period that allows you to submit 2017 claims into early 2018, it is a good idea to get the reimbursement submitted by year end to be safe in case you are not familiar with your specific plan rules. To the extent that the reimbursement is not requested in time, these funds in the dependent care FSA will be forfeited.
It is also a good time to consider how much you will contribute to your dependent care FSA for 2018. Employees can elect to contribute up to $5,000 per couple, per year to a dependent care FSA ($2,500 for married filing separate taxpayers). Consider if you have a change in circumstance that will cause a change in expenditures. Eligible expenses (stated above) are for children 12 years old and younger or for a spouse or relative who is physically or mentally incapable of taking care of themselves and lives in your home. Perhaps your child will be going to middle school next August and will not need before or after school care that you were paying for in elementary school. Or maybe you were paying a daycare for child care, and next year a grandparent will be watching your child. Take the time to consider what your 2018 child care expenses will be, especially if they are under $5,000. This way you can contribute the appropriate amount to the dependent care FSA and not have to forfeit any funds.
If you have any questions about these year-end deadlines, please give us a call. We would be happy to discuss your specific situation.