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How To Use Your FSA

By October 20, 2023No Comments
FSA

How to use your FSA

Using a Flexible Spending Account (FSA) involves several steps to ensure that you maximize its benefits while staying within the IRS guidelines. Here’s how to use an FSA account effectively:

  • Understand Your FSA:
    • Make sure you understand the specifics of your FSA, including the plan year, contribution limit, and any employer or plan-specific rules. Your employer or FSA administrator can provide you with this information.
  • Contribute to Your FSA:
    • Decide how much money you want to contribute to your FSA for the plan year. Your contributions are typically deducted from your paycheck on a pre-tax basis, which reduces your taxable income.
  • Use the FSA for Eligible Expenses:
    • FSAs are designed to cover qualified medical expenses. These expenses can include:
      • Doctor’s office co-pays and deductibles
      • Prescription medications
      • Dental and vision care, including eyeglasses and contact lenses
      • Medical supplies (e.g., bandages, crutches)
      • Certain over-the-counter (OTC) medications (Note: OTC rules can change, so check the current IRS guidelines)
      • Certain medical procedures and services (e.g., chiropractic care, acupuncture) with a doctor’s prescription
  • Keep Documentation:
    • Retain receipts and documentation for all FSA expenses. You may be required to submit these documents to your FSA administrator if they audit your account or if you’re audited by the IRS.
  • Submit Reimbursement Claims:
    • Your FSA may work in one of the following ways:
      • Debit Card: Some FSAs provide a debit card that you can use to pay for eligible expenses directly at the point of sale.
      • Reimbursement: You pay for the eligible expense out of pocket, keep the receipt, and then submit a reimbursement claim to your FSA administrator. This can often be done online or through a mobile app.
  • Use It Before the Deadline:
    • Be aware of your FSA’s “use it or lose it” rule or any grace period. Most FSAs have a deadline by which you must spend the funds in your account. Any unused funds may be forfeited. Some plans offer a grace period of up to 2.5 months into the next plan year to use the remaining funds.
  • Plan Your Expenses:
    • Estimate your eligible healthcare expenses for the year and contribute accordingly. However, be careful not to over-contribute, as any unused funds may be lost.
  • Coordinate with Other Health Accounts:
    • If you have other health-related accounts like an HSA or an HRA (Health Reimbursement Arrangement), make sure you understand how they work together and which account to use for which expenses.
  • Stay Informed:
    • Be aware of any changes in IRS rules and FSA regulations that may affect your account. Rules can change over time, so it’s important to stay up-to-date.
  • Consult Your Plan Administrator:
    • If you have questions about your FSA or need assistance with reimbursement claims, reach out to your FSA plan administrator or HR department. They can provide guidance and support.

Using your FSA wisely can help you save money on eligible medical expenses while reducing your taxable income. Be diligent in keeping track of your expenses and following your FSA plan’s guidelines to ensure you get the most benefit from the account.

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