When it turns out that you owe a lot of money to the IRS, it is best to save money on taxes in any way possible. One of the ways for me to do that is by getting the most out of my tax saver benefit (TSB) plan at work.
What is a Tax Saver Benefit (TSB) Plan?
At our place of employment the TSB is a flexible spending plan that allows employees to set aside pre-tax dollars for use on either child care during the year or medically related expenses that aren’t covered by insurance such as deductibles and co-pays. Some employers may refer to these plans as flexible spending accounts or plans or “cafeteria plans”.
For 2012, the maximum that we can contribute is $6,000 for either child care, medical expenses or a combination of both. Since my wife stayed at home when the kids were younger and now we don’t need child care, we have always selected the medical expense option.
The difficulties associated with these plans is that you have to use the money or you would lose it. So it is imperative that an accurate assessment of needs during the upcoming year be made since the anticipate payroll deductions are determined each fall for the following year. This is different from a Health Savings Account (HSA) in which the money will roll over from year to year and can be invested as well.
Speaking of the HSA…
It used to be that I didn’t have a Health Savings Account at work, but now that it is available, I have signed up for that plus a high deductible health plan. Because I have an HSA, the impact on the TSB is a little bit tricky. I can no longer use the TSB for co-pays or other medical expenses. That is what the HSA is for. Instead, the TSB is basically for eyes and teeth now.
Having six kids means a fair amount of dental work and routine care during the year, so I am able to take advantage of the TSB and save some money on my taxes. Believe me, every bit helps.
Now this year, in order to maximize the benefit that I am receiving, I called the orthodontist in November before the enrollment period to estimate my costs for this year and set aside that amount plus a little bit extra. The kids are getting into that age where they are getting braces so it is relatively easy to figure out the costs that will be incurred in 2012. I plan on doing the same thing for the next year since the last 2 kids are getting close to that age.
In the meantime, thanks to our relative health, I have been able to put away money in the HSA for later and not use any of it over the past several years. Ultimately, the plan is to have it available should I need my knees replaced like my dad. They swell when I run and are often sore, but I am getting along and hope to put off any significant procedures as long as possible.
Readers, do you have a flexible spending plan or health savings account to set aside pre-tax dollars for later use?
- Flexible Spending Account: Are You in the Sweet Spot? (bargaineering.com)