Don’t assume that unused Flexible Spending Account funds will rollover into the next year.
2017 is almost over and you know what that means, right? Tax season is just around the corner. Now is a great time to review your personal finances and make sure you’ve taken full advantage of any tax saving strategies that have been made available to you throughout the year.
One of the most common mistakes people make when it comes to saving money on their taxes or reducing their tax burden is not fully utilizing funds they have set aside in their employer sponsored Flexible Spending Account (FSA).
Flexible Spending Accounts are a valuable tool that allows pre-tax deductions from employees’ paychecks into a separate bank account which can then be used to for ELIGBLE medical expenses like doctor visits and prescription drug co-pays, dental work, certain medical equipment, and prescription lenses (glasses and contacts). In 2017, flexible spending contribution limits were capped at $2,600 by the IRS.
These accounts are usually set up with third party companies like Discovery Benefits and many come with a debit card that makes paying for eligible expenses very convenient. In some instances, receipts may be required to substantiate that purchases were indeed used for an eligible medical expense.
Unfortunately, the funding of these accounts is automated and many FSA participants either forget they have them, or don’t think they have any qualifying medical expenses. Not surprisingly, most participants in a flexible spending account don’t even know how to check their balance. According to SHRM (The Society for Human Resource Management) hundreds of millions of dollars in tax advantaged FSA funds go unused every year. Don’t make this mistake!
While it’s true that some plans allow up to $500 of unused FSA funds to be rolled over in to 2018, this option is not available to everyone (check your employer’s individual plan). If your FSA plan doesn’t allow you to roll-over funds into your 2018 FSA, or you have more than $500 of used money in your 2017 FSA, there are a few easy things you can do to avoid losing the money.
Perhaps the best way to spend unused FSA funds is to buy prescription lenses from a reputable online company. If you or a member of your family wear glasses or contacts, stocking up on an extra pair of glasses or a few boxes of contacts is a very quick and efficient way of using up excess FSA funds. You can even buy a nice pair of fashion sunglasses.
In fact, some online optical companies like Discount Glasses and Discount Contact Lenses have great end-of-year promotions specifically designed for people with unused money in their flexible spending accounts. In many cases, these companies offer fast free shipping and easy returns that make the experience of buying prescription lenses much more convenient. And who couldn’t use a little more convenience during the holidays?
In addition to the peace of mind that comes with having a quality pair of back-up prescription lenses, stocking up on prescription lenses will also reduce the amount of qualifying medical expenses you may have in 2018 so it’s also a good idea to re-examine the amount of money you’re contributing to your 2018 flexible spending account.
Flexible Spending Accounts are a very useful tool when used properly, but it never makes sense to throw money away just to avoid having to pay taxes. Spending unused FSA funds on quality prescription glasses or contacts is an excellent way to ensure your FSA money is being utilized in the most efficient way possible.
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