Flex Spending Experts? Tax Savings Question

[Tigger&Belle]

In the past we've done the flex spending through my DH's job. My DH hates having to resubmit receipts that they question. He thinks it's a big hassle and not worth it.

I'm wondering how much it saves us in taxes. I figured that if we do a $2000 withholding (did $2500 in 2005) and we are in the highest tax bracket that it saves us hundreds of $'s a year (around $600), but my DH says that's not the way it works because of other deductions.

I am a tax dummy and really want to know how much this is saving us. If it's not much then I don't want my DH to be bothered with the hassle, but if we are able to save hundreds of dollars by paying a large chunk of our medical costs tax free then I would be willing to take over the work or at the very least tell my DH to deal with it.

Can anyone explain this to me on a 3rd grade level?

 

[can'twait]

I think it depends on what your income is and what your tax bracket is, because it reduces your taxable income and may put you in a lower tax bracket, which helps in more ways than one. My accountant said it definitely is worth it. I'm mathematically challenged, so I can't get more specific, but this is how I understand it, hope it helps!

 

[Christine]

It's kind of tricky trying to figure out what you actually save. I do the flex plan though because it is VERY important to me to get my taxable income down as low as I can. It works the same way as 401K and comes off your gross and makes the IRS think you make less than you really do. Definitely worth it do it.

 

[Toby'sFriend]

no, you are right. What it does is makes the money you spend on Medical/Dental tax free by reducing your taxable income. The marginal tax rates on higher incomes in 2005 are 25%, 33%, or 35% so what you are saving in taxes is $2500 times whatever rate you fall into.

I'm not clear what your DH means by other deductions though. If you do not use the Flex Plan, medical expenses are deductible, but only if you spend more than 7.5% of your Adjusted Gross income on Medical Expenses. Very few people do that.

I agree that the paperwork is a major PITA though.

 

[Tigger&Belle]

Do you all feel that it's a big hassle? What make my DH mad is that one of my Rx's is an off amount since it's less than my insurance co-pay and every time I get that it gets kicked back and my DH has to send in the receipt. He doesn't have a fax machine anymore so he has to mail it it. Also, whenever we use it to charge things like contact solutions, OTC medication, etc (that are allowed items) those things get kicked back and the receipts need to be sent in.

We undertand why there are the strict rules regarding what can and can't be bought with that pretax $ and that there are government restrictions, but he just seems so bothered by it. Honestly, I think he's being a bit overdramatic about it and it doesn't seem that it would take that long, but maybe it does.

I would be willing to take over the hassle of it, but my DH is refusing that. The copy machine is in his office, so I assume that he doesn't want to be disturbed and he is concerned that he'd end up doing it anyway.

We've agreed to talk this through tonight, but I want to have an idea of the tax savings before talking to him. Also, I want to have an idea of how much of a hassle it really is.

 

[Tigger&Belle]

no, you are right. What it does is makes the money you spend on Medical/Dental tax free by reducing your taxable income. The marginal tax rates on higher incomes in 2005 are 25%, 33%, or 35% so what you are saving in taxes is $2500 times whatever rate you fall into.

I'm not clear what your DH means by other deductions though. If you do not use the Flex Plan, medical expenses are deductible, but only if you spend more than 7.5% of your Adjusted Gross income on Medical Expenses. Very few people do that.

I agree that the paperwork is a major PITA though.

Thank you, that's what I thought. We don't come close to spending 7.5% of our gross income on healthcare so don't deduct otherwise.

I'm not sure what he means, either. Honestly (and I'm not trying to slam him) I think that he's grasping at straws and figures that I'm too ignorant about the taxes to put any thought into this and that I will just let it go if he says that it doesn't save us much money.

Bottom line is that he doesn't want the hassle, but won't "let" me take it over for various reasons.

OK, this is turning into a vent--guess I won't forward this thread to him.

But I do want to have my ducks in a row when discussing it with him. If it's not saving us much then I'm ok with not doing it. Also, we could do less than the $2500 that we did this year and that way we wouldn't have the hassle of making sure we keep every receipt and charge everything to the flex spend.

Doing the $2000 would still save us $700, according to my calculations.

 

[tarmand]

Couldn't he just send in a copy of the receipts the first time so that they are not rejected?

 

[KathyTX]

I haven't really found the paperwork to be bad at all for our Flex account.

I just stick any receipts (prescriptions, doctor/dentist visits, glasses, contact lens supplies) that apply into an envelope and then periodically make copies of all the receipts, add up the total, and mail that in with a claim form.

The others are correct about the savings. If you are, for example, in the 25% tax bracket and you put $2000 in your Flex account, you're saving $2000 x .25 = $500. That's a $500 savings right off the top of your taxes.

 

[can'twait]

It kind of is a PITA but I like to get the checks in the mail.

I do it while I am at work and I do it for my boss too. It is much easier to fax the stuff. I'm not too fond of having my SS# go through the mail. Once you get a system down it's not so bad. If you are detail oriented and can easily keep track of everything, it is not too bad. I happen to be somewhat anal retentive, so it doesn't bother me, but I know people who can't be bothered with the receipts, etc. and it's not worth the $ to them.

 

[marlasmom]

Toby's Friend is absolutely right. Used to do this for a living.

 

[Toby'sFriend]

Do you all feel that it's a big hassle?

It is kind of irritating to me because a couple of years ago it was much easier. The same company that administers our health insurance administers the Flex Plan. It used to be that they would automatically submit all our co-pays for Flex reimbursement. Now I have to wait for them to mail us the Statement of Benefits, make a copy of it, and mail it right back to them.

I have an envelope hanging on our bulletin board. Whenever I buy cold medicine, contact lens solution, or I get a statement of benefits showing a co-pay or amount due -- I stick the paper in there. Then every 3 or 4 months or so I pull it down and do it all at once.

 

[Tigger&Belle]

Couldn't he just send in a copy of the receipts the first time so that they are not rejected?

It does seem that we should just be not charging some of the stuff and sending in the receipts instead of waiting for them to question the charges.

I did just ask him for some information that would support what he is saying about the tax savings differing depending on our other deductions. Of course he didn't have a source of information since he's basically not basing that on fact. And I didn't tell him my DIS sources...

 

[Tigger&Belle]

We always save receipts, so that is not an issue. Our problem is being organized enough to find that receipt.

I did pull out the trump card when talking with him a few minutes ago and mentioned that I was thinking of getting the Lasik surgery this year. I'd better look into that real fast and make sure that I'd be a candidate. I'm painting myself into a corner, I do believe.

 

[Christine]

The reason your DH is getting tired of it is because he is not doing it properly the first time.

My flex plan will only take the actual store receipt for OTC stuff and the Explanation of Benefits statements that the health insurance prepares every so often. There was only one exception to this and that is when we had a health insurance company that was like an HMO and they did not do EOBs--they only dealt in co-pay receipts. They would then accept the receipt from the doctors office.

Submitting this stuff is really not a big deal. I administer this for our company. We have a form that must be filled out which you have to write down each doctor and what you are claiming. That all has to be backed up with a receipt or an EOB. If I have a lot of visits, it can be a bit time consuming so I try not to let it stack up.

I think you should push your DH to do this.

 

[Tigger&Belle]

Supposedly we're allowed to charge directly onto the card for OTC meds, contactt solution, etc. But if all are getting kicked back then it's not worth the hassle and they should just be submitted directly.

Yes, I am going to push him to do this. He told me that he doesn't really spend that many hours a month with it, but that it's a headache keeping track of the receipts. Considering our expenses (DD in college) and me being mostly a SAHM (I do very part time daycare) we can save a lot of money and it's worth it, in my opinion. Personally, I think he's being a baby about it. But I don't think I'll word it to him that way.

 

[Christine]

Supposedly we're allowed to charge directly onto the card for OTC meds, contactt solution, etc. But if all are getting kicked back then it's not worth the hassle and they should just be submitted directly.

Yes, I am going to push him to do this. He told me that he doesn't really spend that many hours a month with it, but that it's a headache keeping track of the receipts. Considering our expenses (DD in college) and me being mostly a SAHM (I do very part time daycare) we can save a lot of money and it's worth it, in my opinion. Personally, I think he's being a baby about it. But I don't think I'll word it to him that way.

I will tell you that the men in my office do not do their own flex care submissions! They take the blank forms home to their wives and the wives save up the receipts, fill out the forms, and give them to me. The only issue I see is that since you are at home, you don't have access to a copier. Maybe you should just prepare the whole thing, have him take it in and make a copy for your records, and then that's all he'll have to do.

 

[Dan Murphy]

FSA's are great. Use them. And the tax logic here is correct.



(not to be taken as financial or tax advice)

 

[Tigger&Belle]

He works at home so I could use his copier or give them to him to copy.

The thing that's irritating is that had I not questioned this whole tax thing and just believed him then we would have been out hundreds of dollars. But he stated it like it was fact. And he wonders why I question him! Again, I'm venting--maybe it's today's cloudy weather, but it's a good thing he's in a meeting today in VA--better that he be in a different state even if it's only an hour away.

 

[Tigger&Belle]

(not to be taken as financial or tax advice)

LOL I won't hold you accountable, excuse the pun.

 

[golfgal]

I usually do one lump sum or a couple submittals each year. At DH's old job we could flex out up to $5000 so the year I got new hearing aids we did that and this year when DS got his braces we flexed out $5000 so those were both submitted as one claim. Other years our claims are mainly for medications and office visits. For prescriptions I have the pharmacy print out a list of all the meds we had up to that point and then submit one lump sum. I usually do that in Nov and that is "extra" Christmas money. For other larger things like new eye glasses I will send those in individually if I don't anticipate any other charges. It is so much easier this way.

Do you have a fax option with your computer, we do. Check your computer to see if you can fax right from your computer. I know Dh's old company you could go online and fill out the forms in PDF form, print them off and then you just faxed or mailed that with all of your receipts.

The only "problem" I have ever had was with my last submittal. The kids had all been to the asthma Dr, same day, same time and had sent in their office visit charge along with a bunch of other stuff. They said two of the submittals were "duplicates". I just called them and told them to read the patient name again and they did and took care of it.