Managing U.S. Flexible Spending Accounts

David T. sunfish62 at yahoo.com
Mon Jan 5 20:30:43 EST 2009


>From my perspective, I would continue to handle it the same. At the beginning of the year, the asset account for the current year would have a zero balance. Claims submitted against this would send the account negative, but payroll deductions would chip away at the negative balance until by the end of the year, when the balance should be zero.

David

--- On Mon, 1/5/09, charles dandridge <crdandridge1 at gmail.com> wrote:

> From: charles dandridge <crdandridge1 at gmail.com>
> Subject: Re: Managing U.S. Flexible Spending Accounts
> To: sunfish62 at yahoo.com
> Cc: "Users Gnucash" <gnucash-user at gnucash.org>
> Date: Monday, January 5, 2009, 11:39 AM
> My FSA health account makes the whole amount available at
> the beginning of
> the year and takes out money each pay to gradually repay it
> back, how do you
> account for this?
> 
> Thanks
> 
> On Mon, Jan 5, 2009 at 1:30 PM, David T.
> <sunfish62 at yahoo.com> wrote:
> 
> > I thought I would share my insights with the list on
> handling Flexible
> > Spending Accounts. Most of this will be obvious for
> accountants, but for me
> > it was not, and I share in hopes it helps someone
> else!
> >
> > Flexible Spending Accounts are a U.S. tax option that
> allow individuals to
> > separate up to $5000 annually from their pre-tax
> income and use that money
> > to pay off Health or Dependent care costs. The money
> is usually deducted
> > directly from your paycheck and is deposited in an FSA
> account. You save by
> > paying for services with pre-tax dollars.
> >
> > However, the accounts are set up so that if you
> don't use the money before
> > the end of the tax year (plus a grace period), the
> money goes to the
> > administrator of the account (Use it or lose it). So
> it is important to
> > track how much you have spent so far of your FSA
> dollars and be sure to get
> > it all.
> >
> > I had set up my FSA accounts as Asset accounts, but
> always had trouble
> > tracking how much I had left in the accounts, since
> the grace period meant
> > that some transactions in the current year were
> actually for the previous
> > year. The solution I have found is to break these
> accounts into subaccounts
> > by year, which will allow me to see clearly how much
> remains in each year.
> > The payroll deductions now go into the year for which
> they apply, as do the
> > expenses. If all goes correctly, there will be a zero
> balance in the year's
> > account at the end.
> >
> > Like I said, an accountant probably knows this stuff
> cold, but for this
> > average user, it was a revelation that I think will
> simplify these accounts
> > for me.
> >
> > David
> >
> >
> >
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