You're heading home from your Thanksgiving get-together, loaded down with leftovers and maybe something less welcome.
Yeah, your indigestion has been acting up, inflamed by overly rich food and some family members who just wouldn't let things go.
The good news is that you can use your flexible spending account (FSA) funds to pay for the Tums or Gaviscon or whatever over-the-counter (OTC) remedy works for you.
You may remember that not too long ago, you had to jump through hoops to get FSA coverage for these store shelf treatments under an Affordable Care Act (ACA, but still Obamacare to many) rule that required you get a doctor's prescription for OTC meds before they were FSA eligible.
However, in 2020 the Coronavirus Aid, Relief and Economic Security (CARES) Act restored the no-Rx-needed use of this tax-free medical account money to cover OTC treatment costs.
These purchases are a good way to use up your FSA balance. However, a lot of folks still fall victim to this tax turkey #5, losing FSA funds because they don't spend all the account's money by a specific deadline.
Popular, and easy, workplace benefit: FSAs are a great workplace healthcare benefit. You put pre-tax money into the account and then use it to help pay some of your out-of-pocket medical expenses.
It's easy to establish. Just calculate how much you'll likely have to come up with for copays, both for doctors' visits and prescriptions, as well as the amount of your employer-provided medical coverage's deductible. If you're planning other costly healthcare procedures, such as your child's orthodontia, add that in, too.
Then have that total automatically taken out of your paycheck in equal installments.
Since the FSA contributions are made before other paycheck taxes are figured, the amount you put into the account should be offset a bit by your tax savings.
Use or lose FSA funds: However, the use-or-lose rule is a major downside to medical FSAs.
In many instances, if you don't spend all the money in your FSA by the end of your benefits year, which in most cases is Dec. 31, you lose it.
Check with your benefits office about this possible year-end deadline. If you do have to spend all your FSA money by 12/31, you have just more than a month to get to it.
Because no one ever wants to waste money, that Dec. 31 FSA deadline confronting these account owners is this weekend's By the Numbers figure.
Or get an FSA rollover or more time: Some FSA owners, however, have other options, and more time.
Workplaces can choose to let their employees roll over some unused FSA money into the next benefits year. The amount is adjusted annually for inflation. For 2022, that was $570. For 2023, up to $610 in unused FSA money can be carried forward.
Other companies give their personnel a 2½ month grace period to use any of their FSA funds that weren't spent by the end of the regular benefits' year. That's March 15 if your benefits year follows the calendar year.
The key takeaway for workers with FSAs is to check with your employer about your FSA options.
Don't waste FSA money: Whenever your FSA spending deadline is, make sure you meet it. If you don't spend it, your employer gets to gobble up your unused FSA funds.
You can find some ways to spend your account dollars in my post 7 ways to spend your end-of-year FSA funds, as well as this one on ways to spend tax-favored FSA money if you're facing 3/15 (or later) deadline.
And you can check out all five of this season's Tax Turkeys to Avoid in the box below.
2022's Tax Turkeys 🦃 🍗 🦃 to Avoid
Addendum, Sunday, Nov. 27, 2022: The goal of Don't Mess with Taxes is to talk turkey when it comes to tax matters. But if you're looking for some literal turkey talk, check out my November post at my tumblr tax blog, Tumbling Taxes. It includes a video of Texas turkey callers.
You also might find these items of interest:
- 10 unusual but allowable FSA expenditures
- 8 ways to use medical FSA money by Dec. 31
- Make the most of tax-deductible medical miles
- 10 ways FSA/HSA funds can help you cope with COVID-19