Posted on 01/27/2015 2:52:51 PM PST by KingofZion
Moves in Washington may curtail the availability of workplace “flexible spending accounts” for medical and child-care expenses.
FSAs can allow families to set aside thousands of dollars of their salaries each year to pay qualifying expenses without that pay ever being subject to federal income tax. If a family in the 33% marginal tax rate sets aside $5,000, for instance, it could save $1,650 in U.S. tax.
Still, many families have a love-hate relationship with these benefit programs. Creating anxiety are the “use it or lose it” terms: Employees often have to guess at future expenses, and they forfeit some of the money set aside if actual expenses are lower.
Now, President Barack Obama is proposing to eliminate the child-care plans completely, in order to help fund an expansion of the Child and Dependent Care Tax Credit, according to a recent White House fact sheet on tax overhaul. “The President’s proposal would replace the current system of complex and duplicative incentives with one generous and simple child-care tax benefit,” the fact sheet says.
Under current law, taxpayers can use the dependent-care plans to avoid taxes on up to $5,000 a year in pay (or $2,500 if married filing separately).
The maximum contribution to medical FSAs has already been capped. And in coming years, a provision of the health-care overhaul “will likely result in the demise of medical FSAs at many companies,” says Eddie Adkins, a partner in the Washington national tax office of accountants Grant Thornton.
The maximum annual contribution to health FSAs was limited as of 2013 to $2,500 a person plus an inflation adjustment. It is $2,550 for 2015. Before the maximum was set, many companies had a cap of $5,000.
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(Excerpt) Read more at blogs.wsj.com ...
Just another example of the inherent weaknesses and idiocy of the current tax code. Go to a flat tax: 10% on all income, no deductions for anything, not even having a poor man’s job. 10%. Pay it. Done. Dismantle the IRS.
More deliberate wealth destruction by the “progressives”.
He wants to replace these plans with a tax exemption for everyone. Swell.
Whatcha wanna bet that "the working poor" would receive cash benefits ala EITC?
Just another redistribution program.
I’d be OK with that if the rate was 3% instead of 10%.
Given that almost everybody lives in a state, the only thing the federal govt should be doing is protecting the borders and fielding a military.
Local taxes should be highest, followed by state, with the Feds a distant 3rd.
I would agree 3-5% is enough tax, and the only thing federal government should be in charge is defending borders, national interest and interstate roads.
We had an FSA but dropped it because the paperwork requirements were onerous. Receipts had to be copied on to an 8 1/2 x 11, one page per receipt. Postage to mail the d@mn packet was about $3.00. Of course when you’re getting over a grand back that isn’t a bad return....except that it is “your” money in the first place.
What they need to do is get rid of the FSA and make everything an HSA. It would get rid of some arbitrary rules and make people breath a little easier when bills come in.
We have an HSA at work, I treat it like an extension of the 401K, so if you max your 401K and HSA, that’s 30K in Tax-Deferments in a year.
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