Tax Savings You Can Bank On

Transcription

1 Tax Savings You Can Bank On Fexibe Spending Accounts

2

3 Highights Fexibe Spending Accounts Fexibe Spending Accounts (FSAs) are a convenient, before-tax way to pay for eigibe out-of-pocket heath care expenses, as we as dependent care expenses. Money from each paycheck is deposited into your account(s) before federa income, Socia Security and Medicare taxes* are withhed. You are then reimbursed for eigibe expenses using before-tax doars from your account(s). Of course, participation in the pans is totay vountary. Effective date The Unreimbursed Medica and Dependent Care FSAs are pan-year programs. Empoyees currenty eigibe for these programs must enro during the Open Enroment period. New empoyees can join the pans once they satisfy their empoyer s waiting period. Contribution amount You can contribute up to the specified maximum each pan year in the Unreimbursed Medica Account and up to $5,000 each pan year in the Dependent Care Account, regardess of when you first become eigibe during the year. Reimbursements Reimbursement checks are maied to your home address or can be directy deposited into your bank account. Pease contact your empoyer for detais on your run-off period and to determine if your empoyer has adopted the grace period aowed by the IRS (up to 2 1/2 months). Funds not used during the pan year or grace period are forfeited. In effect, you must use it or ose it. Changing or terminating participation Your eection must remain in effect for the pan year. You may change your eection during the pan year ony under certain circumstances (e.g., a quaified change in status) defined by the IRS and aowed by your empoyer. Participation terminates each pan year. You must re-enro in the pans each pan year. * Unreimbursed Medica FSAs are exempt from state tax everywhere except New Jersey. Dependent Care FSAs are exempt from state tax everywhere except New Jersey and Pennsyvania. 1

4 Unreimbursed Medica What if I have an out-of-pocket heath care expense? The Unreimbursed Medica FSA pan is an opportunity for you to pay for out-of-pocket heath care (medica, denta and vision) expenses incurred by you and your famiy members with before-tax doars. This may be the ony tax advantage avaiabe to you for these kinds of expenses. Few peope can ever quaify to deduct these expenses on their tax returns. What s eigibe? Expenses eigibe for reimbursement incude: Medica fees. Annua physica examinations. Denta examinations. Contact enses and soutions. Diabetic suppies. Eyegasses. Eigibe over-the-counter drugs with a prescription.* Prescription drugs (except cosmetic prescriptions). X-rays/ab fees. Hospita services. Chiropractor s fees. Hearing aids and their batteries. Surgery. Ambuance service. Dentures. LASIK eye surgery. Smoking cessation programs/rx. How It Works n n n Money is withhed from your saary and deposited into your account. Minimum: Determined by your empoyer. Maximum: Determined by your empoyer. You incur out-of-pocket heath care expenses. You receive a receipt and an Expanation of Benefits (EOB) from your insurance carrier. n n Psychiatrist s and psychoogist s fees. Acupuncturist s fees. Orthodontia. Periodontics. Orthopedic shoes/orthotics. Durabe medica equipment. Trave to and from a physician s office. Weight oss programs (requires a physician s note). Not eigibe Expenses that are not eigibe for reimbursement through the Unreimbursed Medica FSA incude: Expenses incurred before you become eigibe to participate in the account. Expenses incurred after your termination date. Expenses that are paid by heath insurance. Ony necessary medica and denta expenses NOT paid by heath insurance wi be reimbursed under the Unreimbursed Medica FSA. Expenses for cosmetic surgery. Eigibe over-the-counter drugs without a prescription. Insurance premiums. Cosmetic prescriptions. Teeth whitening. Vitamins. Gym memberships. You fie a caim eectronicay via the website or by submitting a competed caim form to: Horizon BCBSNJ P.O. Box 1369 Newark, NJ Fax: or You receive reimbursement from your account. * Effective 1/1/2011, most of these eigibe drugs wi require a physician s prescription to be reimbursabe. 2

5 Dependent Care Do I need a Dependent Care FSA? n Do you have chidren under age 13 who are in day care/after-schoo programs or summer camp whie you work? n Do you pay for the care of disabed dependents so that you can work? If you answered yes to either of the above questions, then the Dependent Care FSA may be right for you. What s eigibe? You can use the Dependent Care FSA to pay yoursef back with before-tax doars for day care expenses incurred for your chidren under age 13, or for any other person considered your dependent for tax purposes who is physicay or mentay incapabe of sef-care, regardess of age. Eigibe expenses Expenses eigibe for reimbursement through the Dependent Care FSA incude: Dependent care (incuding wages and reated taxes) provided in your home by a babysitter, housekeeper or reative who is not your dependent. Dependent care provided outside your home, incuding quaified day care, day camp or other outside dependent/chid care services, such as before- and after-schoo programs. Payment made for dependent care services outside your home for a dependent who spends an average of eight hours a day in your home. Preschoo/nursery schoo. Generay, eigibe chid care costs incude ony those for the actua care of your dependent, not costs for education, suppies or meas uness those costs cannot be separated. Refer to IRS Pubication 503 for a compete ist of eigibe expenses. Their website address is < Not eigibe Expenses that are not eigibe for reimbursement through the Dependent Care FSA incude: Dependent care provided by another dependent or your chid under age 19. Dependent care obtained for nonwork-reated reasons. Expenses for overnight camp. Dependent care expenses incurred if your spouse does not work, uness your spouse is a fu-time student or disabed. Any expenses you caim for the dependent care tax credit on your federa income tax return. Care provided in a group care center that does not compy with state and oca aws. Costs for after-schoo educationa programs (i.e., tutoring). Educationa expenses (such as those for private schoo) for kindergarten or higher. Expenses incurred before you become eigibe to participate in the account. 3

6 Federa Tax Credit vs. Dependent Care FSA Federa Tax Credit vs. Dependent Care Spending: Which is right for you? Your federa income tax return aows you to take a credit for dependent care expenses. Generay speaking, the Dependent Care FSA provides more tax savings than the federa tax credit. Keep in mind that you save tax doars no matter which option works better for you. Comparison You shoud consider whether using the federa tax credit for dependent care expenses can save you more in taxes than using the Dependent Care FSA. Because you cannot caim the same expenses in both paces, your choices are: Caim your eigibe dependent care expenses under the dependent care tax credit on your federa income tax return, or Use the Dependent Care FSA for reimbursement of your eigibe dependent care expenses. Visit our website, for an onine worksheet to compare the Dependent Care FSA vs. the Federa Chid Care Credit. The dependent care tax credits higher imit on quaifying expenses changed how the tax credit and Dependent Care FSA interreate. An empoyee with two chidren and $6,000 in dependent care expenses wi be abe to use both the Dependent Care Credit and Dependent Care FSA. How It Works n Money is withhed from your saary and deposited in your account. Minimum: Determined by your empoyer. Maximum: $5,000 per pan year. n You incur dependent care expenses. n You fie a caim eectronicay via the The empoyee wi first optimize participation in the Dependent Care FSA at $5,000 and then take the Dependent Care Credit on the remaining $1,000 ($6,000 reduced by FSA deferras of $5,000) of eigibe expenses. Tax savings When you estabish a Dependent Care FSA, the money you contribute to your account is free from federa income, Socia Security, state and Medicare taxes and remains tax free when you receive it. This resuts in savings for you! Getting started is easy. First, estimate how much you wi spend on dependent care for the pan year. Based on the amount you eect, contributions wi be taken out of your paycheck each pay period throughout the pan year. Then, you fie a caim for the expense and are reimbursed from your account. You are reimbursed up to your account baance at the time of reimbursement. If there is an outstanding baance, this wi automaticay pend unti additiona payro deductions are accrued. It s important to remember, however, that expenses eigibe for reimbursement through the Dependent Care FSA are the same expenses that are eigibe for tax credit on your federa income tax return. You wi have to decide which method is better for you based on your income and persona tax status. website or by submitting a competed caim form to: Horizon BCBSNJ P.O. Box 1369 Newark, NJ Fax: or n You receive reimbursement from your account. 4

7 Worksheet Pease read the encosed information before competing the worksheet. Remember, if you overestimate, the amount you don t use wi be forfeited. Unreimbursed Medica FSA Prior Year Projected List the amount you spent for: Actua Expenses Expenses Deductibes/coinsurance/copayments $ $ Eigibe over-the-counter drugs with a prescription* $ $ Vision care/lasik eye surgery $ $ (eye exams, contact enses and soutions and eyegasses) Routine exams if not covered by insurance $ $ (Ob/Gyn, we visits, etc.) Prescription drugs $ $ (Does not incude cosmetic prescriptions) Wheechair, crutches and durabe medica equipment $ $ Chiropractor/Acupuncturist/Menta heath visits $ $ Trave costs reated to medica care $ $ List the amount you spent for out-of-pocket denta expenses: Examinations, ceanings and X-rays $ $ Fiings, crowns and bridges $ $ Orthodontics $ $ Dentures, impants, periodontics $ $ Projected Unreimbursed Medica $ FSA Deposit Tota $ Tota $ Dependent Care FSA Prior Year Projected Actua Expenses Expenses Dependent care services provided in your home $ $ Day care center $ $ Preschoo/Nursery schoo $ $ Before- or after-schoo care $ $ Summer day camp faciity $ $ Projected Dependent Care FSA Deposit $ Tota $ Tota $ * Effective 1/1/2011, most of these eigibe drugs wi require a physician s prescription to be reimbursabe. 5

8 Rues for Unreimbursed Medica and Dependent Care FSAs IRS rues for Unreimbursed Medica and Dependent Care FSAs Unreimbursed Medica Expenses must be incurred during the pan year. The amount you contribute into the account can ONLY be appied for services performed or materias purchased during the pan year uness your empoyer has adopted the grace period (up to 2 1/2 months) aowed by the IRS. If your expenses are covered by a heath care pan, you must attach a copy of the Expanation of Benefits (EOB) from the insurance carrier when you submit an Unreimbursed Medica FSA caim. Medica and denta expenses paid with your Unreimbursed Medica FSA reimbursement cannot be caimed as a deduction for federa income tax purposes. Dependent Care Your tota contribution to the Dependent Care FSA cannot be greater than your earned income or your spouse s, whichever is ower. For exampe, if your spouse s saary is $4,000 and your saary is $30,000, the most you can contribute is $4,000. If you and your spouse fie a joint income tax return and both have a Dependent Care FSA, your tota combined imit is $5,000 per pan year. Likewise, if you and your spouse fie separate income tax returns, your individua Dependent Care FSA imit is $2,500. If you are singe with an eigibe dependent, you can eect up to $5,000 per pan year. You must report the name, address and Socia Security number or taxpayer ID number of each dependent care provider when you submit a Dependent Care FSA caim. Making changes during the year To quaify for the specia tax treatment of the FSA programs, you cannot make changes in your eection amount during the pan year uness you experience a quaified change in status, or certain other events, recognized by the IRS. Changes in famiy status incude: Marriage or divorce. Birth or adoption of a chid. Death of a spouse or dependent. Termination of your or your spouse s empoyment. The switching from part-time to fu-time or from fu-time to part-time empoyment status by you or your spouse. Significant change in your spouse s heath coverage due to change in empoyment. Unpaid eave of absence by you or your spouse. Residence change. If money is eft over Make sure you estimate accuratey how much you spend during each pan year. Any amount remaining in your spending account(s) at the end of the pan year (or the end of the grace period, if avaiabe) wi be forfeited. If you overestimate how much you spend, federa aw states that you must forfeit any amount that s eft in the account. On the other hand, don t worry if you have estimated accuratey but haven t fied caims yet. If your empoyer has chosen to eect a grace period, you have unti three months after the pan year ends to fie caims for this money. 6

9 Enroment and Fiing Caims Fiing caims When you incur an eigibe expense for the Unreimbursed Medica or Dependent Care FSA, submit a signed caim form aong with the required backup documentation to: Horizon BCBSNJ P.O. Box 1369 Newark, NJ Participants can aso visit our website at to fie FSA caims eectronicay. The minimum amount for which you are reimbursed is $25 (except when annua eection minus caims paid is ess than $25). A reimbursement checks are maied to the participant s home address. Empoyees aso have the option to eect direct deposit of FSA reimbursements into a checking or savings account. Shoud you enro? The worksheet incuded in this booket assists you in cacuating how much of your annua saary you woud ike deducted and aocated to the Unreimbursed Medica and/or Dependent Care FSA. Because you are not paying Socia Security tax on the portion of your income deposited into your spending account(s), your Socia Security benefits may be sighty reduced. However, the tax savings you gain wi more than offset any such reduction in your Socia Security benefits. The maximum amount avaiabe for reimbursement during the pan year for the Unreimbursed Medica FSA is the annua eection (minus caims paid). You must have enough money in your Dependent Care FSA to cover the amount of your caim(s) before fu payment occurs. For exampe, if your account baance is $150 and you submit chid care expenses of $275, you woud receive a check for $150. The $125 baance woud automaticay be paid as soon as you accumuate more money in your Dependent Care FSA. 7

10 Avaiabe Services Interactive Website Horizon BCBSNJ offers secure onine services through our website at < Onine Worksheets - Dependent Care vs. Federa Tax Credit. - Unreimbursed Medica Worksheet. Onine Account Baance Inquiry - Receive up-to-date account baance information. Onine Caim List - Provides information on the most recent caims submitted. Onine Payment List - Detais the most recent FSA payments issued from your account(s). Payment Option Direct Deposit Participants can eect to direct deposit FSA reimbursements into a checking or savings account. Fax Service Fax your Unreimbursed Medica and Dependent Care caims to our office at or hour Voice Response System Account Baance Inquiry Receive up-to-date account baance information with the ease of a touch-tone phone. Ca to free at Onine Caim Entry Modue - Submit your Unreimbursed Medica and Dependent Care caims over the Internet. Downoadabe Forms - Downoad and print Fexibe Spending Account forms directy to your computer: k FSA Eection Form, k Direct Deposit Enroment, k Change in Status,... and more. 8

11 An independent icensee of the Bue Cross and Bue Shied Association. Registered marks of the Bue Cross and Bue Shied Association. and SM Registered and service marks of Horizon Bue Cross Bue Shied of New Jersey Horizon Bue Cross Bue Shied of New Jersey Three Penn Paza East, Newark, New Jersey (W0910)