Can someone please explain how the FSA works?

amother

Mon, Jan 12 2015, 2:36 pm

My. Husband gets a FSA through work and we are planning on using the maximum childcare allowance. I am confused as to how it works. I know the childcare situation needs to be on the books and have a tax ID. Check. Now how does it work? Do we get reimbursed? Does the school get the money? Does it simply put us in a Lowe tax bracket because those are pretax dollars? Im confused about how it works and how it actually helps us. Thanks.

happyfam

Mon, Jan 12 2015, 8:15 pm

You pay the childcare provider as you normally would. Whatever amount you elected to put in the FSA (in your case $5,000 if you are maxing out) will come out of your husband's paychecks throughout the year (it should be divided evenly). You need to submit a form to the benefits company when you want to reimbursed for money that went into the FSA. You can only ask to be reimbursed once you have received the services from the childcare provider and once you have accumulated enough money in the FSA account to cover that amount. The benefit of having the FSA is that you are not taxed on the money that goes into the FSA so it lowers your taxable gross.

SRS

Mon, Jan 12 2015, 8:31 pm

I'd say happyfam explained it well. One note is that to benefit the full $5000, you need $5000 of earned income. Anything less will need put back on your tax return as income. It is a nice benefit. We just started using it. It is reimbursements only, so you have to be able to front the money.

amother

Mon, Jan 12 2015, 8:47 pm

Thank you! You explained it better than HR did. It makes sense. And yes, we meet the conditions noted. Thank you.

mommyhood

Mon, Jan 12 2015, 8:57 pm

On other thing to note is that you'll need to get invoices from the provider monthly (or however often you want to submit for reimbursement) or have them sign the form from your FSA. So make sure you arrange that with whoever is providing the childcare.

amother

Mon, Jan 12 2015, 9:41 pm

Can you make your own FSA or is it only through an employer that offers it? E.g. IF you are self employed or a contractual worker, or if your employer doesn't offer this.

ruchelbuckle

Thu, Jan 15 2015, 12:01 pm

amother wrote:

Can you make your own FSA or is it only through an employer that offers it? E.g. IF you are self employed or a contractual worker, or if your employer doesn't offer this.

No, it needs to be offered through an employer.

ruchelbuckle

Sun, Nov 27 2016, 10:18 pm

Instead of asking random strangers on the internet (who may or may not be a reliable source of information), go directly to the source: the IRS publication 502.

https://www.irs.gov/publicatio.....78885

(and according to this, therapy by a properly licensed mental health practicioner in your state would be an eligible FSA expense).

groisamomma

Sun, Nov 27 2016, 10:27 pm

What does FSA stand for and does it have to relate to childcare? What do I ask HR for if I want it? They offer a million different things so I never bother listening. I might want this one though.

harriet

Sun, Nov 27 2016, 10:50 pm

groisamomma wrote:

What does FSA stand for and does it have to relate to childcare? What do I ask HR for if I want it? They offer a million different things so I never bother listening. I might want this one though.

Flexible Spending Account.

HR enrolls you and diverts your paycheck into the account. $ from the account is not taxed (that's the benefit) and has to be used for health care expenses typically not covered by insurance (ie co-pays, deductibles, lens solution, lasik surgery, glasses...)

You decide how much $ to put in (there's a maximum amount) and if you don't use it, you lose it.

ruchelbuckle

Sun, Nov 27 2016, 11:17 pm

there are two separate FSAs: one for medical expenses and one for dependent care.

this site explains how they work.
http://www.bcbsm.com/index/hea......html

btw, AFAIK-- a dependent care FSA could be problematic for you if your provider won't provide her SSN or other Tax ID (I forget what it's called.. EIN, maybe?) The provider does NOT need to be licensed through the local board of health or anything, but (s)he does need to provide her SSN. When signing my kids up for playgroup/babysitting , I always say, "I'm planning on paying you with my Flex Spending account. Just want to confirm that that works for you."
Dependent care FSA can also be used for "regular" preschool programs at local schools ( any grades before Kindergarten) and day camps (not sleepaway).

amother

Powderblue

Tue, Dec 27 2016, 8:09 am

Keeping every single invoice and receipt is important. In my corporation . I get the money in advance and can swipe for a tylenol humidifier then I do t submit the recript and I get warnings etc. KEEP EVERY PAPERWORK

amother

Powderblue

Tue, Dec 27 2016, 8:14 am

If hard to keep receipts use only for bigger amounts. For submitting there is an app now (at least for my FSA- called Wageworks) dental can also be used. I dont put 5000 . I put about 2500 for a family of 3 big kids who will spend on braces. I would start with putting like 1500 and next year if 1500 was too little then raise a little. In my corporation if the dont use I lose! (Although it s strange. ..)