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Your salary. You work hard to earn it.
Now, there's a way to keep more of it. To set a portion aside in a special account to cover the annual health and dependent day care of everyone in your family, tax-free.
They're called Flexible Spending Accounts, and are available through participating employers. If these optional benefit plans are offered by your employer, you may be able to enjoy a significant annual tax savings.
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 What Are Reimbursement Accounts?
Dependent Day Care Reimbursement Accounts (FSA)
How They Work (Forms)
Plan Your Contributions Carefully
Dependent Day Care Reimbursement Accounts vs. IRS Tax Credits
How to Receive Reimbursement
What to Submit
How to Keep Track Of Your Account Balance
Insufficient Funds
Repetitive Claims
Complying With Federal Tax Rules
What Are Flexible Spending Accounts?
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Flexible Spending Accounts enable you to set aside a predetermined dollar amount in an account to cover eligible out-of-pocket health care and dependent day care throughout the year. IRS rules allow you to contribute to your account(s) through payroll deduction on a pre-tax basis — before federal income tax, social security, or (in most cases) state withholding taxes are deducted — reducing your taxable income. Then, as needed, you can withdraw funds from your account(s) to reimburse yourself for the eligible expenses you've paid. The dollars set aside in a Flexible Spending Account are actually worth more because they're tax-free. As a participant, you pay no taxes on the contributions or the withdrawals.
This tax-efficient benefit program is offered by employers.
Kazdon offers two types of accounts: Health Care Flexible Spending Accounts and Dependent Day Care Flexible Spending Accounts. These are optional benefits. When offered by your employer, you can participate — or not — but they can make a significant difference in your costs. Check your benefits and enrollment materials to see which options are available to you. |
Dependent Day Care Reimbursement Accounts
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For non-medical day care expenses for children ages 12 and under, or disabled dependents provided that they satisfy the definition of a "Qualifying Relative" under federal tax law. Dependent day care expenses are reimbursable as long as the provider is not your spouse, another dependent or your child if age 19 or younger. |
How They Work.
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• Estimate what you'll need for out-of-pocket health and/or dependent day care expenses for the coming year. Use last year's records to make an accurate forecast. Your employer determines the maximum amounts that you can set aside for each type of account. Estimate carefully and contribute only as much as you think you'll need, subject to your plan's limit.
• Divide this amount by the number of paychecks you receive yearly. This is the amount your employer deducts from each check.
• Your employer deposits these pretax payroll deductions into your non-interest-bearing Flexible Spending Account(s).
• Anytime you have an eligible expense, submit your receipt along with a Reimbursement Request Form for either Health Care or Dependent Day Care Reimbursement. You'll be reimbursed with funds from your account according to the reimbursement schedule determined by your employer
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Plan Your Contributions Carefully.
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Whether you participate in a Health Care or Dependent Day care Flexible Spending Account; you'll need to set your annual contribution goal amount(s) carefully. Estimate your anticipated out-of-pocket expenses as accurately as possible to put aside enough to cover them — without contributing more than you need. The Federal Government requires that you forfeit any funds remaining in your account at the end of the plan year. Before you set your contribution amount, learn which types of expenses are eligible for reimbursement and which are not.
Dependent day care contribution maximums are defined by the IRS based on your tax filling status. Ask your benefit manager for more information. |
Dependent Day Care Reimbursement Accounts vs. IRS Tax Credits.
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As an alternative to a Dependent Day Care Reimbursement Account, the IRS provides tax credits through the Child and Dependent Care Credit (Topic 602) if you rely on dependent day care in order to work.
You can either participate in a Dependent Day Care Reimbursement Account or receive IRS tax credits, but not both. So you need to determine which tax-saving option is most beneficial for your family. Compare the advantages by calculating approximately how much you'll reduce your taxes with each method. Your decision depends on your overall childcare expenses, your household income and filing status.
To find out if you qualify for the Child and Dependent Care Credit (Topic 602) and to learn how to calculate your tax savings, visit the IRS Web page on Topic 602, or call the Internal Revenue Service toll-free, 1.800.829.1040, for assistance. |
How to Receive Reimbursement.
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WHEN you can submit your eligible claim.
According to the IRS, you're entitled to reimbursement of eligible expenses incurred during your period of coverage. The IRS defines "incurred" as when the service was provided, not when you were billed, charged or paid for the service. For example, if your child's day care provider bills you at the start of each month, you receive reimbursement from your Dependent Day Care Reimbursement Account after you've received all day care services for that month, not when you paid that month's bill.
Submit your requests in any amount and throughout the plan year. Our reimbursement system accumulates your reimbursable expenses until they reach the minimum check amount designated by your employer. We automatically send you a reimbursement check during the next payment period.
Your employer also provides you with the opportunity to submit end-of-year claims during a specified period following the close of the plan year. For example, if your plan year is a calendar year, January 1 to December 31, and you have a doctor's office visit on December 27, you'll be able to submit your copayment receipt in January and receive reimbursement. Also, if you terminate your employment at any time during the plan year, you may submit reimbursement requests for a limited time following termination. See your benefits manager for details. |
WHAT to submit.
Health Care Reimbursement Requests:
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When you have an eligible Health Care expense and you have insurance coverage, you must submit:
• A completed and signed Health Care Reimbursement Account Request Form, and:
o An Explanation of Benefits (EOB) or,
o An itemized bill which must show what insurance has paid or,
o An itemized receipt for co-payments
When you have an eligible Health Care expense and you do not have insurance coverage, you must submit:
• A completed and signed Health Care Reimbursement Account Request Form, and:
o An itemized bill , an itemized invoice or an itemized receipt
Dependent Day Care Reimbursement Requests:
When you have an eligible Dependent Day Care expense you must submit:
• A completed and signed Dependent Day Care Reimbursement Account Request Form, and:
o An itemized bill, itemized invoice, itemized receipt or cancelled check |
How to Keep Track Of Your Account Balance.
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You receive an Explanation of Benefits (EOB) with each reimbursement check. We also send you periodic account statements that show your annual goal amount, the year-to-date contributions you've made, the year-to-date reimbursements you've received, and your current available balance. |
Insufficient funds.
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If your reimbursement request exceeds your available account balance:
Health Care — you receive reimbursement up to your annual goal amount, even if you have not yet contributed the full amount to your account.
Dependent Day Care — we send you a partial payment, whatever's in your account, and automatically reimburse you for the rest of your claim as we receive additional contributions to your account. We do so until the expense is fully paid or contributions for the plan year stop. You won't need to resubmit that claim.
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Repetitive Claims.
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Some of your eligible expenses may be ongoing and you may be filing claims for the same amount on a regular basis. Monthly bills for a child's day care costs are an example. To receive reimbursement, the IRS requires that you submit a completed Reimbursement Request Form and receipts each time you have a claim, even though the bill may be repetitive. |
Complying with federal tax rules.
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Reimbursement Accounts are allowed by Section 125 of the Internal Revenue Code and certain restrictions apply.
• Determine which account(s) to join and how much to contribute prior to each plan year.
• You cannot change your contribution amount once you've elected it. The amount of pretax dollars you choose remains in effect for the entire year. You can adjust your contribution only if you have a change in family status, such as the addition or loss of a dependent, or a change in marital status. But you can elect a different amount each year.
• Health Care and Dependent Day Care accounts are separate. Funds may not be transferred between the two, nor can health care expenses be reimbursed from a Dependent Day Care account, or dependent day care expenses from a Health Care account.
• If you don't use it, you lose it: the IRS requires that you forfeit any unused account balances remaining at the end of the year. You cannot carry funds over to the next year.
• Expenses reimbursed from Health and/or Dependent Day Care accounts cannot be claimed as deductions or credits on income tax returns.
• You cannot withdraw funds without an eligible claim. |
This information is provided as a general overview to help you understand the benefits of the Flexible Spending Account program. If your employer offers this program, the plan(s) available to you have features specifically chosen by your employer. For details about your employer's plan, ask your benefits manager.
Some employers use Reimbursement Request Forms which contain specific information about their plans, such as where to mail requests and where to call with questions. Check with your benefits manager about your plan. You may be able to use the generic forms we've given you here. For your convenience, you can view, print and submit these forms anytime you need them.
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