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Saturday, October 31, 2009


by JC Leahy
What a good deal!!! Pay your medical expenses AND save Federal income tax, AND save payroll taxes, AND save State income tax all at the same time!!! Just be careful not to bite the razor blade in that apple!!

As writer Dachary Carey observed, "When you're thinking about ways to manage your medical expenses, one option that many people fail to consider is the flexible spending account." Flexible spending accounts were created by Congress eons ago. They help people pay their families' unreimbursed medical expenses such as co-pays, orthodontics, chronic diabetes or asthma medications, eyeglasses, any sort of surgery, hospitalization, or other medical and drug expenses. A flexible spending account (FSA) is sort of like a 401(k). A certain amount of money is withheld from your paycheck each month, free of income taxes or payroll taxes. Usually you can set aside, by installments each paycheck, $4,000-$5,000 per year. The beauty is that for every $1,000 you put into your FSA, you save 28% or 15% (depending on your tax bracket) of income tax. PLUS Social Security tax of 6.2%, PLUS Medicare tax of 1.45%, PLUS your State income tax. This means in the 28% bracket you save $356.50 in taxes for every $1,000 of medical expenses you channel through your FSA!!! In the 15% bracket it's $226.50. If you sock away $5,000 to FSA, you save $1782.50 or $1,132.50!! Plus State income tax!! What a great tool to ease the burden of medical expenses!!! What a rosy apple Congress had dropped into your bag!!!

There is one problem. In true Lex Luthor fashion, Congress has inserted a razor blade into your apple!! The razor blade is this: When you set aside money for your family's medical expenses in an FSA, and you don't spend it ALL by 12/31 (or whatever your annual deadline is) the institution holding your money gets to confiscate the whole balance. Thousands upon thousands of people lose their entire FSA balances to managing institutions every year!! Do you find that harsh? Hard to believe? Unjust? Do you think it would make more sense to just let folks keep their own money in their FSA for rainy-day medical expenses?
Well, with that caveat, the FSA is a really smart way to help pay family medical expenses. You can use it for medical expenses of you, your spouse, and your dependents. Check with your human resources department about how to begin, because there is usually an annual election made sometime before January 1 -- or sooner. And don't bite into that razor blade!!

PS -- Congress is about to take away, or cap, and/or tax FSA's. As one arrogant SOB, Ron Lieber, wrote in the New York Times, "Use the tax break before you lose it, because many of you probably don't deserve to have it in the first place." Is that arrogant or WHAT??

You might want to e-mail and/or telephone your senators and congressional representative about this. Tell them to leave your FSA alone and get the razor blade out of the damn apple!!! Here's the link for that:



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