Did you know that 30 million Americans who have paid into their FSAs end up leaving about $450 million of tax-free money unclaimed by the time the deadline rolls around. That’s what Jeremy Miller says, founder and president of FSAStore.com, a one-stop shopping site for FSA-friendly products and services. Remember, when it comes to flexible spending accounts (FSAs), you use it or lose it.

And where does all that unspent money go? Not in your wallet, but back to the people who really don’t need it…your employers.

So how do you minimize your losses and maximize your flexible spending Account?

1. Find out what’s covered.
   Ok, so you may need a prescription for over-the-counter drugs now but there are plenty of other things for which you can get reimbursed. According to Miller, “There are 24,000 products that fit the FSA requirements, from first aid to family planning, and FSAStore sells 4,000 of those products.” Allocating less than last year because of the prescription drug change is a mistake.
2. Know Your Deadline.
   A large majority companies require that you deplete your FSA account by the end of the year although there are some companies that provide you with another 3 month grace period. That means you have until March to take care of yourself and your family with 2010 dollars. Make sure you know what your company does.
3. Turnaround the paperwork ASAP.
   Even if your company provides you with a 3 month extension, the date to file your reimbursement requests may be sooner. Don’t wait! Take a look at your annual receipts. Co-pays or other relevant medical fees are eligible for reimbursement. Get them in…now!
4. Check, double-check, and (okay) triple-check.
   Know your balance and the deductions against it. Treat it like a checking account that you want to get to a zero balance.

Follow these four easy steps, and you won’t be giving your hard-earned money back to your employer.

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.”

The search for revenue is revisiting the debate over FSAs, HSAs and other medical savings accounts. Sparking controversy from some healthcare critics, they say these accounts are actually tax shelters for the rich and encourages spending on unnecessary or otherwise frivolous expenses. On the other hand, proponents of these plans say that flexible spending account programs help people pay for high medical expenses that aren’t covered by insurance.

The Daily Koz reports the debate is further complicated by the fact that “the government doesn’t track even basic details on how the accounts are used, how much money is involved and what happens to the unspent funds. The only data available come from the industry-the companies that administer the programs for employers. Even that information is incomplete.”

According to a July 16,2009, Bloomberg news report “The House Ways and Means Committee is proposing to prohibit reimbursements for over-the-counter drug purchases using pretax health-spending plans.

The proposed limits, affecting employer-sponsored flexible spending accounts and privately owned health savings accounts, were added to a 1,018-page bill aimed at overhauling the health- care system. ”

The proposed limit would raise $8.2 billion over a decade, according to official estimates. It would supplement a proposal to increase taxes on the highest-earning Americans, including a 5.4 percent surtax on couples who earn more than $1 million.”

Stay tuned…

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?

Eligible dependent care expenses for flexible spending accounts are expenses that allow a couple, if married, to be employed. Dependents can include a child under the age of 13, or elderly parents or a spouse who may live with you but are incapable of taking care of themselves.

There is a bipartisan effort in both houses of Congress to raise the cap, but it is complicated by worries over the federal budget deficit.  The House proposal, co-sponsored by Rep. John Yarmuth (D-Ky) and Rep. Sam Johnson (R-Tex), would raise the limit to $7,500 from $5,000. A Senate bill co-sponsored by Sen. Blanche Lincoln (D-Ark.) and Sen. Olympia Snowe (R-Me.), would make it $7,500 for one dependent, and $10,000 for two or more dependents. Both bills suggest raising the cap as necessary to keep pace with inflation. However, opposition is expected because these changes would further cut into federal revenue at a time of spiraling deficits.

Everyone agrees the cap is outdated; advocates say prospects for an increase “are very positive.” Nevertheless, opposition is likely because of the potential impact on tax revenue at a time when federal budget deficits loom large.