USING TAX-FREE DOLLARS FOR MEDICAL EXPENSES

USING TAX-FREE DOLLARS FOR MEDICAL EXPENSES

 

American workers may be eligible to use tax-free dollars to pay medical expenses that not covered by other health plans. Any eligible employees of businesses that offer a health flexible spending arrangement (FSA) must act before their medical plan year starts to take advantage of an FSA during 2020. Self-employed individuals are not eligible for this program.

An employee who chooses to participate in an FSA may contribute up to $2,750 through payroll deductions during the 2020 plan year. Any amounts that an employee contributes are not subject to federal income tax, Social Security tax, or Medicare tax. If permitted under the plan, employers may also contribute to an employee’s FSA.

Over the course of the tax year, employees may utilize funds from their FSA for qualified medical expenses that their health plan fails to cover. These expenses may include deductibles, co-pays, and other medical products. Services covered by an FSA include vision care and eyeglasses, as well as dental care and hearing aids. Employees interested in an FSA should talk to their employer for information regarding those expenses that are eligible and the procedures for asserting claims.

An FSA contains a use-or-lose provision, which means that participating employees must incur eligible expenses by the end of the plan year or forfeit any remaining amounts that are unspent. Employers have the option, if they so choose, to offer more time for participating employees to use funds earmarked for an FSA plan. Employers typically offer one of the following options but may not offer both.

The carryover option allows employees to carry over up to $500 of unused funds to the following plan year. Thus, an employee with unspent funds at the end of 2019 would still have these funds available for use in 2020.

The grace period option allows employees to incur eligible expenses until two and a half months after the end of the plan year – for example, March 15, 2020, for a plan year ending on December 31, 2019.

Employers are not required to offer FSAs. Interested employees should check with their employer to see if they offer an FSA. An Atlanta tax attorney who is experienced in handling IRS-related cases can inform you of your options when dealing with health flexible spending arrangements (FSA). For more information on how we can help you or a loved one, contact us today online or call the Gartzman Law Firm at (770) 939-7710.

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