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A Tax Rule Washington Is Making Easier

Posted By Tamara Lytle On November 5, 2013 @ 3:51 pm In Bulletin Today,Politics | Comments Disabled

money stack [1]No more rushing to buy a spare pair of prescription glasses to use up your flexible spending account [2] (FSA) before the year ends.

>> Sign up for the AARP Money newsletter [3]. [4]

The Treasury Department is letting employers give their workers a break by allowing them to roll over up to $500 [5] from their special accounts into the next year.

The accounts, which each year let you set aside up to $2,500 in before-tax dollars to pay for health care expenses [6], can save hundreds of dollars in taxes. The catch has always been the “use it or lose it” provision — spend all of the money set aside each year or you forfeit it. (In some circumstances there can be a two-and-a-half-month grace period.)

Of the old regulation, a senior Treasury official said, “In a world where we’re trying to cut down on the amount we’re spending on health care and be more efficient, here’s an area where we have a rule that looks like we’re encouraging wasteful spending.”

Starting this year, employees can roll $500 of unspent FSA funds into the following year. The new rule aims to cut down on wasteful year-end spending and alleviate some of the stress of trying to predict exactly how much to set aside.

>> Get discounts on financial products and services with your AARP Member Advantages. [4]

Fourteen million families use the FSA accounts. It will be up to employers to decide whether to offer the rollovers or stick with the current rule allowing a two-and-a-half month grace period — or do neither. The grace period is shorter but doesn’t have the $500 cap.

ACA = Affordable Care Act = Obamacare [7]

 

 

 

 

 

Also of Interest

 

See the AARP home page [12] for deals, savings tips, trivia and more

 


Article printed from AARP: http://blog.aarp.org

URL to article: http://blog.aarp.org/2013/11/05/a-tax-rule-the-irs-is-making-easier/

URLs in this post:

[1] Image: http://blog.aarp.org/wp-content/uploads/2013/06/52042.jpg

[2] flexible spending account: http://blog.aarp.org/2012/10/30/flexible-savings-accounts-offer-tax-advantages/?intcmp=AE-BLIL-BL

[3] >> Sign up for the AARP Money newsletter: http://www.aarp.org/online-community/people/subscribeFromEmail.action?id=29636&intcmp=ILC-EMAIL-SUB-MONY

[4] .: http://www.aarpfinancial.com/content/aarpfinancial/home.html?intcmp=AE-BL-MON-DISC

[5] roll over up to $500: http://op.bna.com/dlrcases.nsf/id/kerl-9czv8g/$File/IRS%20HealthCare1031.pdf

[6] health care expenses: http://blog.aarp.org/2013/10/31/sally-abrahms-why-you-dont-want-to-wait-for-an-eldercare-crisis/?intcmp=AE-BLIL-BL

[7] Image: http://healthlawanswers.aarp.org/?intcmp=AE-EDO-LNK-HLAW-ENDART-BL-20131011

[8] 401(k) Limits Remain the Same for 2014: http://blog.aarp.org/2013/11/01/401k-limits-remain-the-same-for-2014/?intcmp=AE-ENDART1-BL-REL

[9] Slideshow: Should You Invest in Collectibles?: http://www.aarp.org/money/investing/info-10-2013/investing-in-collectibles-photos.html#slide1?intcmp=AE-ENDART2-BL-BOS

[10] Questions about the Affordable Care Act? Get your answers here: http://healthlawanswers.aarp.org/?intcmp=AE-ENDART3-BL-ADV

[11] Join AARP: https://appsec.aarp.org/MSS/join/application?keycode=U9ZTPH9&intcmp=AE-ENDART3-BL-MEM

[12] AARP home page: http://www.aarp.org/?intcmp=AE-ENDART3-BL-HP

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