You usually get to adjust your flexible spending account only once a year, when your company has it’s benefits enrollment sign-up. It can be tough to figure out your health expenses but it’s worth the tax advantage. (You do contribute to your flexible spending account, don’t you?).
But what happens if you discover you’re expecting after your enrollment period passes? Your health expenses will most likely be going up and it would be nice to adjust your flexible spending allotment.
You’re in luck!
There are a few situation in which you are allowed to change your election after the enrollment period ends. This includes marriage, divorce, and having a baby (or adoption).
How does a flexible spending account work? What are the advantages?
With a flexible spending account you determine an amount that you will be using for eligible health and medical expenses for the year.
This amount then gets deducted from your paycheck on a pre-tax basis (your gross pay). Not all at once mind you. It’s divided amongst all of your pay periods for the year. What’s important to realize here is this money isn’t taxed which is why this is such a great benefit (it lowers your adjusted gross income)!
As you incur eligible expenses you can apply to the company that handles your FSA to get the money back. Usually a receipt is used as proof. With my company’s provider I can fill out the form online and upload PDF’s of the receipts. It doesn’t get much easier (check with your HR/Benefits department to learn what your company system is).
Important note: The flexible spending account money is Use It Or Lose It! If you don’t use the account money it’s gone so make sure you figure out a somewhat conservative estimate of your expenses. Also make sure you apply to get the money back. Some company plans allow you until March of the next year to declare your expenses.
A flexible spending account is a nice way to maximize some tax advantages and save you some money. With a new baby arriving you want to save all that you can!