The Flexible Spending Arrangement, FSA is a unique savings account. The account allows the holder to enjoy specific tax exclusions that result in rollout tax savings.
The unique account arrangements are typically set up for an employee by their employer. With the special arrangements, if the employee fails to use up the funds, the balance is returned to the employer.
The allowable period for employees to use the funds in these accounts is one year. Employers can offer a grace duration for employees of up to 75 days to use up the funds in their FSA accounts.
The extent to which you can use your FSA card is a question for debate amongst the cardholders. Many people are oblivious of the regulations of FSA expenditure.
So, Can I use my FSA card at Target?
You can use your FSA card at target and any other grocery store. You should, however, be aware that there is a limitation on the types of items you can purchase.
The items that you purchase must fall under the list of approved items. Unauthorized item transactions will not go through.
What Other Places Accept The FSA Card?
Generally, the FSA card is meant to be used to cover medical expenses that your health insurer wouldn’t cover. The cover also extends to all expenses not covered by your dental plan.
Now that we know that grocery stores accept the FSA card, let us explore other areas where you can use it to purchase approved items:
You can use your FSA card at any pharmacy or store referred to as a 90% merchant. A 90% merchant is a store that derives at least 90% of its revenue from the sale of medical items.
If a pharmacy declines your FSA card, you can pay out of your pocket and later submit a request for reimbursement. A receipt from the pharmacy must accompany the reimbursement claim.
2. Dental Offices
In most cases, many health insurance covers do not include dental plans. Luckily, you can expense your dental costs to your FSA card.
There are strict limitations on the extent to which you can use the FSA card at dental offices. The cover does not include superficial procedures such as dental porcelain laminates and whitening. Items such as toothpaste and dental floss are also not covered by your FSA card.
Yes, you can purchase approved items on amazon and expense them to your FSA card. There is an entire segment of FSA-approved products on the online retail service. FSA covers the complete expense of approved products and takes care of the shipping costs.
4. Optical Healthcare Services
There is a wide array of eye care services fully covered by the FSA. It is not only limited to specific procedures but also encompasses some eye care products.
Some of the procedures covered are regular eye care examinations, laser eye surgery, and keratotomy. The products covered include but are not limited to: prescribed glasses, contact lenses, eye drops, and cases for lenses and glasses.
5. Baby stores
A whole host of childcare products can be purchased with your FSA card. These items include breast pumps, sunscreen, baby monitors, thermometers, among other items. The cover does not extend to items such as wet wipes and diapers.
How Does The Dependent Care FSA Differ From The Healthcare FSA?
Understanding the concept surrounding the dependent as used by the IRS concerning FSA qualifications can be pretty challenging.
Dependent Care FSA
The following categories of individuals are covered by dependent care FSA:
- Children under the age of 13 are dependents of your federal tax return.
- Includes mentally incapable persons who are dependent on your federal tax return.
- Includes physically disabled persons who are dependent on your federal tax return.
The above categories of individuals ought to be incapable of caring for themselves. In case you have a spouse; the above categories qualify only if:
- The spouse is a full-time student
- The spouse is unable to work because of a disability.
As for healthcare FSA, the cover is available to you and your dependents. The cover is applicable to be used for medical and dental expenses that are not taken care of by your insurer.
Under healthcare FSA, the following individuals are eligible for cover:
- Your spouse (must not be separated)
- Your child provided that they are under the age of 27 during the year of the claim.
- The dependents that you claim as per the details on your tax return.
Who is ineligible for cover?
- If, within the year, you had been listed as someone else’s dependent and happened to file jointly.
- If, within the year, your wife had been listed as someone else’s dependent and happened to file jointly.
- Includes a person you claim as a dependent who had a gross income exceeding 4,300 dollars.
- Includes a person you claim as a dependent who happens to file a joint return.
How To Get Reimbursement For Your FSA
Are you wondering how to get reimbursed for your medical expenses? If so, you ought to submit a claim to the FSA. The claim should be submitted through your employer.
To qualify for reimbursement, you must prove that you received a service or an expense. You can do so by providing receipts. The expenses must also fall in line with products and services covered by the FSA.
Advantages Of The FSA
The FSA provides many benefits to the account holder. Aside from the obvious one being reduced expenses on healthcare, there are several other advantages.
Some of the benefits of having an FSA account include:
1. Flexibility on the employer to design plans:
Employers get the opportunity to customize the health plans for their employees. It enables them to work within specific regulations set by the company policies.
The caveat is that the employees must, at all times, fall in line with federal laws while designing the health plans.
2. A reduction in the amount of payroll taxes payable
If an employer decides to contribute to an employee’s FSA plan, they can claim it as an allowable tax expense. It acts as an incentive for employers to contribute to their employee’s FSA. It also improves the corporate social image and contributes to corporate responsibility.
The contributions are also an allowable tax expense for the employee.
3. Taking up FSA is a streamlined process.
It is straightforward to enroll in an FSA plan. The process is less bureaucratic and tiresome than many people assume.
The only form that you would be required to sign during taxation would be Form 2441. The form is used to establish who the participants for dependent care are.
4. Compatible with employer-sponsored health plan
The FSA plans can be used alongside any employer-sponsored health plan. It gives the employees additional coverage beyond what is covered by their insurer.
Disadvantages Of The FSA
The FSA is not without its flaws. Its advantages far outweigh its disadvantages. However, there are parts to the FSA that are far from appealing.
Some of the disadvantages of the FSA are:
1. Employers may not be willing to contribute to an FSA
Employer participation towards the FSA is 100% voluntary. It means that there are employers who would not be bothered to make contributions.
In many cases, employees make contributions all by themselves. Employer participation is typically low.
2. The FSA disregards the participant’s balance on compensation
An employee is entitled to enjoy the total amount (including the employer’s contribution) regardless of termination.
It means that an individual who is no longer an employee can continue to use the FSA, and the employer cannot recover the funds. It is one of the reasons why there is a reluctance for employers to participate in FSA programs.
3. The Balance Under the FSA Can Be Forfeited
The FSA operates on a ‘use it or lose it’ principle. It means that if you fail to use up the amount, the balance is forfeited to the employer.
The employer might give the employees a 75-day grace period to use the funds. No amount can be carried over to the following year.
The FSA allows an account holder to enjoy specific tax exclusions that result in rollout tax savings. It is an excellent way to incentivize the public to pay for medical expenses that insurance would ordinarily not cover. It extends to dental services as well.
The extent to which you can use your FSA card at retail stores like Target is limited. The FSA covers only items approved for such expenditure. You’re legally required to reimburse any amount that has been expensed to the card if you purchase unauthorized items.