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Your FSA: Use it or lose it by year-end

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in Small Business Tax,Small Business Tax Deduction Strategies

If your company offers a flexible spending account (FSA) for health care expenses and/or dependent care expenses, you can save money by making pretax contributions to the plan. Typically, the contributions are made through regular payroll deductions based on your annual allocation. You can tap into the fund tax-free during the year to pay for qualified expenses.

However, any amount left over at the end of the year is forfeited, under the “use-it-or-lose-it” rule.

Squeeze every dollar out of your FSA before the year ends. You might even move up some nonemergency medical visits from 2010 to 2009.

Companies are allowed to extend the use-it-or-lose-it deadline to 2½ months after the close of the tax year. Therefore, you may have until March 15, 2010, to exhaust your funds (but only if your company plan permits the extended deadline).

Tip: It’s also important to analyze the allocation needed for the coming year. You don’t want to contribute too much or too little.

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