Flexible Spending Accounts
Employees selecting benefits from an FSA make contributions from pre-tax dollars. This equates to savings to the employee since they save federal and state income taxes on the amount contributed, as well as Social Security taxes. The employee authorizes the employer to withdraw the money to place in the FSA accounts from their payroll checks. If the employee reduces the amount of their taxable income they can maximize the amount of money they actually take home.
The amount of money that the employee has deducted pre-tax from their paychecks for FSA-qualified benefits must be used in the calendar year of the withholdings, or else it is forfeited. Therefore, employees must evaluate anticipated expenses for dependent care or medical expenses so that the amount of monies put into the FSA accounts is not too little or too much.
Medical FSAs are popular, as they allow the employee to determine how they wish to spend the money in the account. It can be used to pay for health care copayments or deductibles, vision or dental services, prescriptions or ancillary services. Dependent care expenses can be allocated to childcare payments or adult long-term care expenses.
Employees selecting benefits from an FSA make contributions from pre-tax dollars. This equates to savings to the employee since they save federal and state income taxes on the amount contributed, as well as Social Security taxes. The employee authorizes the employer to withdraw the money to place in the FSA accounts from their payroll checks. If the employee reduces the amount of their taxable income they can maximize the amount of money they actually take home.
The amount of money that the employee has deducted pre-tax from their paychecks for FSA-qualified benefits must be used in the calendar year of the withholdings, or else it is forfeited. Therefore, employees must evaluate anticipated expenses for dependent care or medical expenses so that the amount of monies put into the FSA accounts is not too little or too much.
Medical FSAs are popular, as they allow the employee to determine how they wish to spend the money in the account. It can be used to pay for health care copayments or deductibles, vision or dental services, prescriptions or ancillary services. Dependent care expenses can be allocated to childcare payments or adult long-term care expenses.
