Flexible Spending Accounts

Flexible Spending Accounts

A flexible spending account (FSA) is a tax advantage program where an employee can set aside a portion of his/her earnings to pay for qualified expenses as established by their cafeteria plan. The most common FSA expenses are medical, dental, and vision expenses that are not reimbursed by insurance. Dependent care expenses can also be paid through a Flexible Spending Account. Money deducted from an employee's paycheck and deposited into an FSA is not subject to payroll taxes, thereby resulting in a payroll tax savings for the employee with income taxes and the employer with FICA. The FSA deduction does have to be spent down by the end of the year in order to avoid the "use it or lose it" rule