FSA is making headlines after it was hailed in 2020 for its extended limits. The year is ending now, meaning that time is lapsing, and we don’t know whether there will be another extension. If you have a flexible spending account, it’s time to use the funds lest you lose them.
The FSA is typically set up to attend to out-of-pocket healthcare needs, so you have about two months to conduct all the necessary checkups.
Unlike savings and emergency funds accounts, FSAs apply the “use it or lose it” principle, where funds are only available for a given period. In 2020, the government passed the Stimulus Act Raised Dependent Care FSA Limits which extended deadlines. The Act provided a lifeline after Covid shutdowns restricted medical visits and halted the school calendar.
Now the tide seems to turn since Covid is now behind us. Nothing stops you from spending the money on overnight travels to work, summer camps, school aftercare, etc. So, the full-year grace period is expiring, and your account could read zero on January 2023.
What is FSA?
FSA stands for “flexible spending account,” an account you set up with your employer to save pre-tax funds for out-of-pocket expenses. Through the agreement, the employer deducts an amount from your pre-taxed salary to fund the account under IRS regulations.
Normally there are two types of FSAs; health care FSA (HCFSA) and dependent care FSA (DCSFSA). The latter is suitable for parents with young children, while the former is for individual health and medical care. You can use the money for other expenses such as summer day camps and daycare.
What makes the FSA unique from other savings accounts is that the employer owns it, so can withhold the money if you lose the job.
Its biggest draw is that you can access all your funds even if you’ve just paid a nutshell. You can request the total amount you signed for during registration to attend to any health issues not covered by insurance.
The biggest disadvantage of an FSA account is the deadline by which you should use the money. Once you pass the deadline, a considerate employee may decide to extend the grace period or carry a specific amount over to the successive plan. However, most employees would terminate the remaining funds and start from scratch. This isn’t the kind of thing you want to leave to chance.
How Can I Use FSA Funds?
We mainly use FSAs for medical copays and medications not covered by insurance. However, you can use the funds for other medical services or supplies. The IRS, which monitors FSAs, has provided a comprehensive list of the services and supplies you can acquire through the funds. This ensures you don’t spend discretionary and correctly prepare your tax returns.
Moreover, most online stores, such as Store.com and Amazon, have FSA-eligible products clearly labeled for easy identification and quick online purchase. Below we sample a few supplies that you can pay for with FSA.
- Lenses and glasses
- Hygiene products
- Pet food
- Birth control pills
- Reproductive services
- Allergy testing.
Money is Waiting for You
Don’t wait for the last-minute rush: the end of the year is not that far. You can’t afford to lose any money, including your FSA. Check your balance and plan how to use the funds for the next 60 days.
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