Tag Archives: finances

Financial Friday- It’s your Money*

*Check out my Financial Friday article “It’s your Money”, Part I- Saving for your Child’s Education at http://www.denverparent.net or http://www.denverparent.net/index.php/2011/03/financial-friday-its-your-money/

This article is the first in the series and next week, I will go into more details with 529s and Coverdell ESAs.  Stay tuned …. after all, It’s your Money!

Share

Health Care Flexible Savings Accounts- New Changes coming in 2011

This story is also featured @milehighmamas.com!  See it here
Please leave a comment or ask your tough questions there or here!

If you’re like me, you and/or your spouse have a flex spending account or health care spending account that you put money into, biweekly or monthly. These are great tools if you have anticipated expenses for the upcoming calendar year. For example, if you know you are going to have surgery or a large medical expense like new glasses, new contacts, etc., health care spending accounts or flexible spending accounts are a great way to save a little money. Here’s how it works: Because the money goes into these accounts pre-tax, the contribution is taken from your salary BEFORE it is taxed. Then, when it is paid out to you for eligible expenses, you are not taxed on this money either. It is a great tax shelter but… while that sounds great, read on because putting in too much can come back and bite you a bit as well.

For this calendar year, I overestimated a bit and put in WAY too much. I don’t know whether it was that we have less expenses or just that my new insurance was that much cheaper, but I continued with last calendar year’s amount and it turned out to be too much so as we embark on 2011, I am looking to spend well over $800 before March 15, 2011. Most flex spending accounts give you until March 15, 2011 to incur eligible expenses and they have to be submitted to the company running your Flexible Spending Account by a set deadline. Check with your company because it can be crucial to getting your hard-earned money back!

So how does all this work? Some companies offer a card- so it tracks what you pay in and tracks what you spend too. You get a debit card and you just charge your eligible expenses on that all year long. Many high deductible plans work that way as well. However, MOST companies who offer the flexible spending account require manual enrollment, and your health insurance numbers for paperless reimbursement AND a bank account for automatic deposits. Their websites are chalk full of information and you can track your spending/reimbursements on-line. You have to physically submit a receipt for over-the-counter and eligible items (read on- some OTCs are going away in January 2011 from automatic reimbursement so stock-up now) and then they review the items and pay you back. For example, for costs incurred on eyeglasses, you submit the receipt and you are paid back. For 2010, if you bought Tums, Advil, and cough drops, you have to remember to save the receipt and you get paid back but you have to submit the receipts along with your claim form. It’s a little tedious for working parents and most people in general to collect receipts, copy them, and then send them in manually (fax or postal mail) with their claim form which also has to have a lot of information. Frankly, sometimes it’s a nightmare to submit these! As far as prescriptions, dental and medical visits, if you use your insurance card, then there is generally a paperless reimbursement option so the money automatically appears in your checking or savings account. You have to set that up on-line or when you enroll. So, all in all, that is a painless process if the paperless reimbursement process is working as it should be.

Big change starting January 2011 that you need to be aware of: No more OTC meds like Advil© or its generic equivalent, Tylenol© or its generic equivalent, Tums©, Prilosec, etc., etc., will no longer be reimbursed without a doctor’s note. That’s right folks! If you have a headache and buy Ibuprofen, don’t bother saving the receipt unless accompanying that receipt you also have a doctor’s Rx for that headache medicine. Nice! So, if you are estimating what to put in this year, I would make sure you take out all those OTCs (I approximate AVGERAGE households average about $200 a year) unless you can get a doctor’s note for them. This is a hugechange and many people are re-calculating their costs for the 2011 Calendar Year. Many other things will still continue to require what is called a LETTER OF MEDICAL NECESSITY. These are a hassle too and I have been through a lot to get reimbursements for things my doctor prescribed. For example, if you have a doctor’s note to say buy a humidifier for your allergies, you will sometimes get hassled from the flexible spending account company for buying a more expensive model so you will then need to do a cost comparison and tell them why you bought this humidifier versus some $10.00 model. I kid you not.

So, in sum, there are pros and cons to a little tax savings. While this is a good program and I think people should put in what their estimated costs would be, I would urge you to calculate your spending for this past year and conservatively estimate next year’s because if you put in too much like I did this year, you are at risk for just outright losing that money and then you blow any tax advantage you may have received by putting the money in, in the first place.

With Flex and Health Spending Accounts like all financial accounts, accuracy & diligence is key- I think they are good if you are willing to put in the time to keep great records of your receipts, do the work of sending them in, and also are okay with running around collecting medical necessity letters and OTC Prescription letter if needed. Then you may make out okay. But, if you simply do not want to deal with it, only put in what your estimated true medical/dental/vision costs are for the year – that way you do not have a balance and you definitely do not want to lose the money. Happy Estimating!

Share

There are two certainties in life: Death and Taxes

As I thought of the statement above, I was thinking to myself – death would be a welcome thing as people work on their taxes. Every year, I have done my own taxes and frankly, used to enjoy it. Crunching the numbers, finding a deduction here or there, adding up things, and multiplying. Using Tax Cut and other software makes doing your taxes easier but it still does not take away the marriage penalty, the penalty for being middle income and mildly successful in life, and of course, it does not take the pain of just …. Doing your taxes! So for the last two tax years, we have taken quite a hit. In 2006 because I did not claim the right exemption and as it turns out, last year, despite only working 9 out of 12 months, still not claiming the right exemptions. For a person with an AGI of only $XXK, paying a $XK tax bill is quite a nightmare. Despite maxing out both our 401Ks and taking over $XXK in deductions, it seems that being married to someone who roughly makes the same and investing our money wisely is not a good thing – for the IRS and the Federal Government, being a middle income, jointly filing married couple is a penalty in and of itself. Don’t get me wrong, I consider myself lucky for owing rather than receiving a $XK refund. I would feel cheated if that were the case.

Needless to say, I have decided to raise my arms up in defeat and have done the inevitable – consulted an accountant – several of them and am looking for someone to do my taxes this year and every year hereafter. Sounds nuts but I cannot take it anymore. It seems like I am searching for an accountant I can talk to and ask for financial planning advice and someone who will project what we owe and then do the heavy lifting. With a full-time job during the day, and at night (the baby) and the weekends (the baby), I think it is time to turn over these mundane tasks to someone who gets paid to keep me out of trouble and who knows the laws. After all, you would not want to represent yourself in a $20 million lawsuit would you? Oh, wait, you’re not as dumb as Heather Mills so you probably would hire a good lawyer. Back to the topic of accountants. Shopping for a good accountant requires some leg work – call some friends first. They are a good resource because if they use someone good and have for years, chances are, they are doing something right. Then, meet with them to make sure the personalities at least somewhat mesh and then, of course, hand over your $ and let them do the rest. I cannot believe I have raised my hands in surrender but it is time…. It was a good long run doing my own taxes and I may still yet crunch the numbers myself and see what a difference (if any) an accountant makes but I would rather spend the 40 hours I can spend doing taxes with my daughter. I spend enough time away from her as it is. Happy April 15th and hope you do not owe $XK or even XXK, conversely, I hope you do not get a refund bigger than $3K or you overpaid in 2007 my friend. Remember in, 2007, interest rates were still pretty high in savings accounts and money markets. Go ahead and give your money to the IRS in 2008 – we may be in a recession before long. In life there are no guarantees – we may all lose our shirts in the market or in securities or even in this housing market, but rest assured- you will be guaranteed to still file your 2008 returns by April 2009, and the world will continue as always. Cheers!

Share