Flex mix-up

[Bill Tubbs]

Client just contacted me -- she is a school employee and therefore on a school-year calendar for flex spending. She just realized that she erroneously checked the "Medical" box instead of the "Dependent Care" box on the form. Her husband already flexes medical, and she normally flexes dependent care. She checked with the district offices, who told her she was locked in for the year (basically that she was S-O-L). Any solution to this since it was her error?

Thanks,
Bill

[KJ Judd]

Only thought I have is to buy the entire family new eyeglasses or contacts, etc. to use up the extra medical dollars set aside. Don't you hate it when you're the bearer of bad news?

[Bees Knees]

I agree. Sounds like she needs new glasses.

[Bill Tubbs]

Thanks

That's what I thought, but figured it never hurts to check.

I'm not really the bearer of bad news -- she's already figuring that she's SOL.

Bill

[outwest]

One last thought..

if's probably a stretch, but see if they can trigger a qualifying event to change an election. Things such as a birth/adoption of a child, change in work from full to part time for employee or spouse, etc.

(although it's a qualifying event, please don't suggest arranging the death of a family member for this purpose.)

[Bill Tubbs]

if's probably a stretch, but see if they can trigger a qualifying event

Outwest... thanks for the thought. I didn't mention that too her (though I knew about the qualifying event clause) 'cuz it seldom happens when you could benefit from it.


A follow-up question: she's wondering if she stocked up on medical supplies (which can be reimbursed by a flex) then donate them if she could get a deduction for that. I don't think she could get a deduction for something purchased with pre-tax dollars, but I'm more concerned with other ramifications of deducting merchandise that was paid for from pre-tax dollars -- after all, flex plans are for unreimbursed personal medical expenses and I would figure there's some penalty for improper use of flex monies.

Would it make any difference if she stocked up on over-the-counter medicines, then a year later saw they were close to expiring and decided it would be better to donate them than to let them expire and trash them?

Bill

[New York Enrolled Agent]

I don't know how helpful this could be but the old "use it or lose it" rule was modified (assuming the employer agreed to this). Taxpayers have a grace period of 2 ½ months after the end of the tax year to use medical flex benefits. So, if H usually puts $x into the flex for dental, etc, then for 2008 he could allocate less and try to spend as much of W's money in the first 2 ½ months of 2008. Depending on the circumstances, you might be able to minimize the loss of some of the flex amount.

Take a look at IRS Notice 2005-42.

[Luis Mopeo]

Would it make any difference if she stocked up on over-the-counter medicines, then a year later saw they were close to expiring and decided it would be better to donate them than to let them expire and trash them?

Would you be comfortable sitting in an IRS audit when the question came up and having the client say "My tax preparer told me to do that."?