Health Flexible Spending Accounts
  • January 13, 2016
  • admin
  • 0

Every year, the IRS reminds eligible employees to take advantage of their employer’s health flexible spending arrangement. Flexible Spending Accounts, or FSA for short, are special accounts where employees can deposit money to pay for their medical expenses that are not covered under other health plans. Interested employees need to decide the amount they want to contribute and inform their employer before the beginning of the next plan year. In this brief post, we will look at 5 commonly asked questions about FSAs and their answers.

1. Are the contributions to the FSA tax-free?

Yes, the amount that goes into these accounts is tax-free. They are not subjected to Social Security tax, Medicare tax or federal income tax. The maximum that an employee may contribute every year to the FSA is $2500. As an employee, you decide on the amount to be deducted toward the contribution.

2. Where can I use FSA funds?

FSA funds can be spent on prescription medications and over-the-counter medicines without a doctor’s prescription. Reimbursements for insulin are also allowed without a prescription. Costs of medical equipment such as diagnostic devices (such as blood sugar test kits), crutches and supplies like bandages are also covered by FSA.

In addition, you may also use FSA funds to pay for certain medical and dental expenses that include copayments, deductibles, coinsurance, drugs, and other allowable health care costs. For a complete list of permitted medical and dental expenses, you can visit the US government’s official healthcare website at

3. Can I spend FSA funds on insurance premiums?

No, FSA funds can’t be spent on insurance premiums. The FSA can only be used to pay for qualified medical expenses. The medical costs that qualify are defined by The Internal Revenue Service and are noted in your FSA plan.

4. Can self-employed individuals contribute to FSA?

No, self-employed individuals cannot contribute to FSA, as they are available only with job-based health plans. Only the employees whose employers offer FSA are eligible for contributing to the FSAs. In fact, it is not mandatory for all employers to offer FSA. Employees, therefore, must check with their employers to see if they offer FSA’s.

5. What happens to the unused FSA contributions?

Ideally, the contributions that you make to your FSA should be utilized in the same year for which they are contributed. If you fail to use the funds, they are forfeited, unless your employer provides you any one of the following options:

Carry-over Option

Under this option, employees can carry over up to $500 of their unused funds to the next plan year. For example, an employee with $400 of unspent funds at the end of the year in 2016 can still have those funds available for use in 2017.

Grace-period Option

Under this option, employees get a grace period of 2½ months after the end of the plan year to utilize the unused funds. For example, for a plan year ending on Dec. 31, 2015, the grace period is offered till March 15, 2016.

Note – Employers may offer either of the two options, but not both. They may also choose not to offer either.

Flexible spending accounts are a great way to save tax dollars on medical expenses if you use them to their maximum potential. Make sure to check out the guidelines identified in your plan.

Please follow and like us:

What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
The Nemeth Law team is exceptional. They treat their clients like a family member who is in crisis. They want you to get the best possible outcome. I really appreciate everything that they did for me. Jake and Ashley had the greatest role in my case and it all turned out for the best for me. Thank you Nick and team for easing my fears and getting me through the long process. I'm truly grateful.
Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
Quick Inquiry


    Enter the text you see above