FSA Contribution Confusion With Husband

[mommyoftwostinkers]

Last year, my husband and I both contributed $5,000 to our own, different FSA accounts. We didn't realize that $5,000 was the max. I have fully exhausted reimbursement on my account but we have not touched a dime out of my husband's account. How will this affect our taxes this year? Do we need to claim this as income or do we count this as a loss? Thank you!

[JotikaT2]

Flexible Spending Arrangements (FSAs) are usually agreements between yourself and your employer.  They are usually treated as "use it or lose it" type arrangements.  

If you do not use the entire amount before the end of the year, you cannot carry it over to the next year.

The maximum contribution for 2019 was $2,700. 

Your employer may offer a carryover provision which allows $500 to be spent within a certain grace period.  

Please see the attached for more details on this.

FSA release from IRS

[mommyoftwostinkers]

Thanks! So, since we're likely to lose it for 2019 is that technically still "income"? 

[JotikaT2]

It depends.

If your employer returns any of the excess contributions to you, then yes it would be considered income.  Your employer would report this to you as income.

But employers don't necessarily have to return the funds to you.

They have options that include using the excess funds to offset the costs of administering the plan, lowering the cost of the current year FSA, or reimbursing costs.