A recent proposal from the Senate Committee on Finance recommends eliminating flexible spending accounts (FSAs) as a way to help fund costs for health care reform efforts.  If enacted, this proposal would negatively affect many Americans who rely on FSAs to manage and pay for their health care costs not covered by insurance…in essence an increase in taxes at a time when many can least afford it.

According to the Daily Kos, “The Joint Committee on Taxation told Senate leaders recently they could collect $68.6 billion over 10 years by abolishing the accounts, along with separate ones in which employers contribute money for workers to use for health care expenses. Eliminating both types of accounts would pay for four percent or more of the estimated $1 trillion to $1.5 trillion cost of expanding coverage to the 46 million uninsured.” (more…)

Bills have been introduced in the Senate and House of Representative to raise the limit on dependent care flexible spending accounts (FSAs) where dependent-care expenses (including child-care) are paid with pretax dollars. Unchanged since 1986, the current cap for qualifying expenses is set at $5000. Unfortunately, more than 20 years later with no change to the limit, this benefit has become significantly outdated.

Dependent Care Flexible Spending Accounts - What Are They?

A dependent care flexible spending Account (FSA) enables you to take pretax dollars and pay for dependent care while at the same time lowering your taxable income. You allot part of your before-tax dollars to help pay for your work-related dependent care costs for the year.

So what qualifies as valid dependent care costs? (more…)

A flexible spending arrangement (FSA), or Flexible Spending Account, as they are commonly called, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States. Flexible spending accounts allow an employee to set aside a portion of his or her earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee’s pay into an FSA is not subject to payroll taxes, resulting in a substantial payroll tax savings. (more…)