48 FINANCIAL WELLNESS Careful Planning Required You should plan your flexible spending account contributions carefully. Here’s why: • Money set aside for health care expenses cannot be used to reimburse dependent care expenses and vice-versa. • Any health care or dependent care expenses that are paid from the flexible spending accounts may not be claimed as a deduction or credit when filing your income tax return. • You cannot stop or change contributions during the year unless you have a Qualifying Life Event. • Once you terminate employment, only expenses incurred before you terminated are eligible for reimbursement from your FSA, unless you elect to continue your health care spending account through COBRA. Dependent care FSA is not eligible for continuation through COBRA per IRS guidelines. • You will be reimbursed for dependent care expenses only up to the amount of your dependent care spending account balance and only after the care has been provided. • USE IT OR LOSE IT! IRS guidelines require that any money left in your flexible spending account at the end of the year must be forfeited. You have until March 31 of the following calendar year to file claims incurred in the current calendar year. Save Money with a Flexible Spending Account (FSA) Here's an example which shows how much you can save in taxes using a health care spending account. With HCSA Without HCSA Annual Base Pay $55,000 $55,000 Total Annual Contribution to Health Care Spending Account $2,550 $0 Taxable Income $52,450 $55,000 Federal Income Tax $9,082 $9,931 Social Security (FICA) Tax $4,003 $4,208 Total Tax $13,085 $14,139 After-tax Eligible Health Care Expenses $0 $2,550 Take Home Pay $39,365 $38,311 Annual Tax Savings $1,054 $0
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