Anyone here use a flex spending account?

[Wyndru]

I am having problems understanding what the point of these accounts are. I've read up on them and met with the payroll person at my job, and I still do not understand where the savings come from.

Basically on my check, the breakdown is like this (using random amounts):

Before flex:
Gross: 2000
Tax: 500
Net: 1500

After flex
Gross: 2000
Tax: 500
Flex: 300
Net: 1200

Now when I submit a claim, they just give me that dollar amount back that I claimed, no more or less. So I'm basically just giving them money to hold onto until I need it? I thought flex was supposed to be withdrawn before tax, not after?

The guy who does payroll that I spoke with said I will save money on taxes because I will technically make less per year, therefore placing me in a lower tax bracket. Is that really where I will see the savings? Because it doesn't seem to me that it would save me a lot to be worth the hassle of filling out the forms and having lower paychecks each week.

 

[TwiceOver]

From Taxes. It is pre-tax money. But I don't know about the tax bracket thing.

 

[Jeraden]

Your after-flex example is incorrect.

You would not have $500 deducted for taxes. The $300 flex comes out BEFORE taxes. So you would only be taxed on $1700. Given your 25% tax rate you used, this would mean you'd only have $425 in taxes withheld. Saving you $75 by utilizing the pre-tax flex deduction.

Basically anything you pay for via your flex account, you are saving the payroll taxes on.

 

[a777pilot]

It's a good deal. I used my flex spending account all the time to pay may out of pocket expenses while I was still working.

I am in favor of any tax reduction.

The down side is that if you don't use all of your flex spending account money by the end of the year, it goes to the government.

 

[Wyndru]

Your after-flex example is incorrect.

You would not have $500 deducted for taxes. The $300 flex comes out BEFORE taxes. So you would only be taxed on $1700. Given your 25% tax rate you used, this would mean you'd only have $425 in taxes withheld. Saving you $75 by utilizing the pre-tax flex deduction.

Basically anything you pay for via your flex account, you are saving the payroll taxes on.

That's what I thought, and when I asked the payroll dude, he said it was correct, that flex comes out after tax on the check. I'm paying exactly the same amount of taxes as I did before the flex, he said this it normal. It even has to columns for before and after tax amounts, and it's on the after tax side. Crap, I'll have to go back to him again.

The down side is that if you don't use all of your flex spending account money by the end of the year, it goes to the government.

We got it for day care, we will actually only be able to claim less than half of what we spend before we run out.

 

[dfuze]

We have it here at work but I wouldn't touch it with a 10 foot pole. Over the past few years I just hear nothing but complaints about hoops to go through for reimbursements. On top of all that, if you don't spend the entire amount pulled out of your checks, you lose it at the end of the year. Too much hassle for very little to get out of it (reduction of $ for taxes)

 

[Jeraden]

Well if it's coming out after-tax, I agree, there is absolutely no point to it. Are you part of a big company or just a small company? If it's a small company, I'd say that your payroll dude has no idea what he's doing.
As a sidenote, I actually work in the payroll department at my company, so I know my tax stuff!

 

[dfuze]

That's what I thought, and when I asked the payroll dude, he said it was correct, that flex comes out after tax on the check. I'm paying exactly the same amount of taxes as I did before the flex, he said this it normal. It even has to columns for before and after tax amounts, and it's on the after tax side. Crap, I'll have to go back to him again.


We got it for day care, we will actually only be able to claim less than half of what we spend before we run out.

I think it still works after taxes because come tax time it can be removed from your overall pay amount, but not 100% sure.

 

[Bignate603]

Now when I submit a claim, they just give me that dollar amount back that I claimed, no more or less. So I'm basically just giving them money to hold onto until I need it? I thought flex was supposed to be withdrawn before tax, not after?

The guy who does payroll that I spoke with said I will save money on taxes because I will technically make less per year, therefore placing me in a lower tax bracket. Is that really where I will see the savings? Because it doesn't seem to me that it would save me a lot to be worth the hassle of filling out the forms and having lower paychecks each week.

Your payroll guy is explaining it really poorly and it sounds like he doesn't really understand FSA or tax brackets. You save money because you can pay health care costs with pretax dollars. Say you're in a tax bracket that will cause you to pay 20% in taxes and you have a medical bill that cost $400. If you paid that cost out of your normal paycheck after taxes are taken out it you'd need to earn $500 gross to pay for that bill. $400 would actually go towards paying that bill, $100 would go to pay taxes.

If you pay using money in your FSA you pay using pretax dollars. That means you only need to earn $400 gross to pay for it. This ends up saving you money.

However, $300 a paycheck is a very large amount to put into your FSA. I only put in $750 a YEAR. You need to remember that FSA is "use it or lose it". If you don't use it within the allotted time (each year plus a few months into the next as a grace period) you lose the money. Only put in the amount that you're almost positive that you'll use. We put in the costs that we need to pay for the prescriptions we already have, our glasses and contacts, and then some random medical expenses each year.

HSAs can carry their value over year to year so they're a bit different.

Edit: You mentioned that you were using this for childcare while I was typing this, that explains the high amount you're taking out of your check.

 

[Wyndru]

Well if it's coming out after-tax, I agree, there is absolutely no point to it. Are you part of a big company or just a small company? If it's a small company, I'd say that your payroll dude has no idea what he's doing.
As a sidenote, I actually work in the payroll department at my company, so I know my tax stuff!

It's a large school district, but there is only 1 payroll employee, and he has made mistakes before. When I started the flex, he took it out 1 week, then the next week he didn't, I asked him about it, then he realized he messed up and took 2x the flex amount on the 3rd check to even it out.

I think it still works after taxes because come tax time it can be removed from your overall pay amount, but not 100% sure.

I think that was the point our payroll guy was trying to make, it just doesn't seem right to me, but I know nothing about this stuff.

 

[Homerboy]

Its taken out pre-tax
If you earn $2000 a paycheck, and have $100 taken out, your pre-tax paycheck is $1900
multiply that by 26 checks a year
your gross income is now $2600 less come tax time.

I have never had an issue with getting reimbursed for flex payments.
keep receipt.
fill out online form
fax in receipt
Money is DD within 2 days.

 

[PokerGuy]

I am having problems understanding what the point of these accounts are. I've read up on them and met with the payroll person at my job, and I still do not understand where the savings come from.

Basically on my check, the breakdown is like this (using random amounts):

Before flex:
Gross: 2000
Tax: 500
Net: 1500

After flex
Gross: 2000
Tax: 500
Flex: 300
Net: 1200

Now when I submit a claim, they just give me that dollar amount back that I claimed, no more or less. So I'm basically just giving them money to hold onto until I need it? I thought flex was supposed to be withdrawn before tax, not after?

The guy who does payroll that I spoke with said I will save money on taxes because I will technically make less per year, therefore placing me in a lower tax bracket. Is that really where I will see the savings? Because it doesn't seem to me that it would save me a lot to be worth the hassle of filling out the forms and having lower paychecks each week.

The savings is in the fact that the amount you set aside for medical expenditures (the flexible spending account) is taken out of your income pre-tax, so you don't pay taxes on it.

In your example, your taxable income would be $1700 instead of $2000. In theory that means your tax withholding should be less as well.

 

[vi edit]

However, $300 a paycheck is a very large amount to put into your FSA. I only put in $750 a YEAR. You need to remember that FSA is "use it or lose it". If you don't use it within the allotted time (each year plus a few months into the next as a grace period) you lose the money. Only put in the amount that you're almost positive that you'll use. We put in the costs that we need to pay for the prescriptions we already have, our glasses and contacts, and then some random medical expenses each year.

He said he got it for daycare, which has a max contribution of $5,000 a year and about 1/2 what daycare costs usually are. And yes to everything else in your post. It's very nice for those of us in higher tax brackets. It's like a 25% off discount on medical and daycare costs.

 

[Bignate603]

Its taken out pre-tax
If you earn $2000 a paycheck, and have $100 taken out, your pre-tax paycheck is $1900
multiply that by 26 checks a year
your gross income is now $2600 less come tax time.

I have never had an issue with getting reimbursed for flex payments.
keep receipt.
fill out online form
fax in receipt
Money is DD within 2 days.

My only problem is with my dentist. Their computer system doesn't allow them to print out a patient ledger showing the procedure that was done and the cost at the time of service. The only receipt they give you when you pay is a credit card receipt without anything on it that says what service was performed which can't be used by itself to get FSA reimbursement. Apparently their computer system doesn't update the patient ledgers until it's allowed to synchronize everything at night. You have to call back the next day and request they send you it by mail. It's absolutely ridiculous.

He said he got it for daycare, which has a max contribution of $5,000 a year and about 1/2 what daycare costs usually are. And yes to everything else in your post. It's very nice for those of us in higher tax brackets. It's like a 25% off discount on medical and daycare costs.

I started writing my post before he mentioned that he was using it for childcare. That makes much more sense.

 

[TwiceOver]

My only problem is with my dentist. Their computer system doesn't allow them to print out a patient ledger showing the procedure that was done and the cost at the time of service. The only receipt they give you when you pay is a credit card receipt without anything on it that says what service was performed which can't be used by itself to get FSA reimbursement. Apparently their computer system doesn't update the patient ledgers until it's allowed to synchronize everything at night. You have to call back the next day and request they send you it by mail. It's absolutely ridiculous.

I had a dentist like that. Couldn't provide me with a statement on a timely basis ridiculous billing errors, no billing terms so you pay some arbitrary amount and they reimburse you if it was too much. I told them to fix their system, give me NET 30, or I walk.

My new Dentist sends me a bill and provides statement of service after each visit. Vote with your wallet.

 

[kranky]

Just want to add that if your payroll guy cannot manage to treat your FSA contributions as pre-tax for payroll purposes, you can simply reduce your withholding to compensate. That way you enjoy the tax savings now, just as though he was treating the FSA as pre-tax (like he should).

The down side is that if you don't use all of your flex spending account money by the end of the year, it goes to the government.

It does not go to the government. It belongs to the company FSA plan. It helps to offset the situations where people use their entire FSA during the year but leave the company before they have made all the contributions. We once put money in the FSA to pay for Lasik ($2,000). We had the Lasik done on Jan. 8, and were able to have the entire $2,000 covered by the FSA even though I had not contributed a dime into the plan at that point in the year. Had I left the company right after the Lasik was done, I would have essentially gotten a free $2,000.

 

[CPA]

It's a good deal. I used my flex spending account all the time to pay may out of pocket expenses while I was still working.

I am in favor of any tax reduction.

The down side is that if you don't use all of your flex spending account money by the end of the year, it goes to the government.

Slight correction, the unused money goes to the company, not the government.

 

[Wyndru]

Just want to add that if your payroll guy cannot manage to treat your FSA contributions as pre-tax for payroll purposes, you can simply reduce your withholding to compensate. That way you enjoy the tax savings now, just as though he was treating the FSA as pre-tax (like he should).

Oh, maybe that is the reason he set it up after tax, I'm already at the lowest withholding right now. I usually try set it up it so I don't get any money back at the end of the year.

 

[jme5343]

It can also be looked at as having the benefit of an interest free loan.

One year, I had a hospital stay and some procedures required during the second week of January. I was able to use what my EOY total would have been to pay that bill. So, basically, I used the whole $2400 I put in to pay a bill in March, even though most of that money hadn't even been contributed yet.

 

[Brovane]

I use the flexible spending account. I put in the max of $5,000 a year since I am married with 2-children and I go through it every year. It is nice becaue as what other people say it uses pre-tax dollars.

The dependent care is a separate account. You can also use pre-tax dollars to pay for child care expenses. So essentially you could put $5k into a FSA account and then another $5k into a dependent care account. All this would be pre-tax dollars and a total of $10k.

I have never had a issue with getting my expenses reimbursed. Actually when the medical office say submites a $400 dollar bill. If the insurance covers $300 out of that, and my share would $100 that I need to pay I will get a $100 DD into my checking account to cover what I need to pay. I then turn around and pay the doctors office. I have heard some people even had debit cards that they can use. We don't have those. The only thing I am upset about is that Democrats medical reform bill is going to reduce the max FSA contribution per year to $2500.

 

[vi edit]

Our daycare flex spending account is pretty cool. Our day care has some sort of arrangement with our insurance company and submits bills directly to them. Every other week we get a check for $200'ish bucks mailed back to us. It's like a mini-payday inbetween real pay days.

 

[Sid59]

FSA rules but you have to forecast your cost, so you use it all. I've used it to pay for braces, eye exams, contacts, eye glasses, doctor's appointments and until the start of this year, OTC drugs.

 

[kranky]

Oh, maybe that is the reason he set it up after tax, I'm already at the lowest withholding right now. I usually try set it up it so I don't get any money back at the end of the year.

Not sure what "lowest withholding" means, since your example showed $500 being withheld. When you determine how much you want to put in your FSA each paycheck, take 25% of that number (which is your tax savings) and tell the payroll guy you want your withholding reduced by that amount.

 

[Homerboy]

If he set it up post-tax, he's doing it wrong. And possibly illegal per the contracts with the FSA/Insurance company? If it's REALLY IS post-tax, I'd tell the guy he fuckign sucks at his job.

 

[sunzt]

I think i've heard of people doing Flex after-tax as well, but wasn't sure what the benefit was. When I did flex, it got taken out before tax and I had no issues getting reimbursed. Now i'm at a new company and they offer a high deductible plan w/ health savings account.... i think a HSA > flex.