Back in 2005, the Treasury Department changed the rules to
allow employers to give workers until March
15 to spend their FSA money from the previous year. The idea was to avoid
problems with workers not being able to get medical appointments in December,
immediately before the old deadline. While employers aren’t required to extend
the cutoff date for FSA expenses, many have. If you work for an employer that
has an extended cutoff date for using your FSA, it’s important to know what
expenses qualify for it.
Money is tight and you don’t want to forget about the money
you stashed away in your Healthcare and Dependent Care FSA. It is important to
spend your FSA money before it goes away. It is estimated that more
than 39 million people have money remaining in their flex spending accounts
after December 31. According to Mercer Global, workers wasted between
$150 million to $200 million of unspent FSA money in 2010. The question is not
only how to spend it, but how to spend it legally.
The money in the Flexible Spending Account cannot be used
for anything other than medical expenses. Talking with a tax professional can
help you to determine what exactly is allowable under the law. Generally
speaking, medical expenses include the costs of diagnosis, treatment, cure or
prevention of disease. You cannot include the expense of items that offer
health benefits such as vitamins or vacations. However, you might be surprised
by what is actually allowable by the IRS as a legitimate medical expense.
Some examples include:
- Special Education.
If a doctor recommends tutoring by a specially trained teacher to work
with a child who has learning disabilities caused by a mental or physical
impairment, this is a medical expense.
- Weight Loss. Fees you pay
for a membership to a weight reduction group can be included if it is for
a specific disease such as hypertension or obesity. This includes fees you
pay to join the group and also the fees for periodic attendance at the
group. You cannot include membership dues to a gym, a spa or a health club
but if the gym charges separate fees for weight loss activities, you can
- Stop Smoking
Programs. You can include the amount you pay for the program to stop
smoking. You cannot include non-prescription drugs such as nicotine
patches or nicotine gum.
- Eyeglasses and Contact
Lenses. The amount you pay for the eye exam, and for eyeglasses or
contact lenses that are for medical, not cosmetic, reasons can be included
in your medical expenses.
- Chiropractic. You
can include the fees you pay to a chiropractor for medical treatment.
- Acupuncture. You can
include fees paid for acupuncture services in your medical expenses.
- Dental Treatment.
Fees paid for the prevention and alleviation of dental diseases can be
included in your medical expenses. This does not include teeth whitening.
- Physical Exam. You
don't have to be sick to see the doctor. The amount paid for an annual
physical exam can be included in medical expenses.
- Qualified Long-Term Care
Insurance Contracts. There are a number of qualifiers to be able to
include this in your medical expenses. Seek the advice of a tax
professional such as eSmart Tax or Liberty Tax Service to get specific information.
Before using the money in your Flexible Spending Account, it
is important to make sure that the item can be included as a medical
expense. Talking to your tax professional is the safest way to make sure
you are using the money appropriately as allowed by the IRS.