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Take Advantage of Flexible Spending Accounts (FSAs).

November 6, 2010

If your company has a FSA, before year-end you must specify how much of your 2011 salary to convert into tax-free contributions to the plan. You can then take tax-free withdrawals next year to reimburse yourself for out-of-pocket medical and dental expenses and qualifying child care costs. Watch out, though, FSA’s are “use-it-or-lose-it” accounts – you don’t want to set aside more than what you’ll likely have in qualifying expenses for the year. And, starting in 2011, over-the-counter drugs (e.g.aspirin and antacids) will no longer qualify for reimbursements by FSAs so you may need to consider that when you determine your 2011 contribution amounts.

If you currently have a FSA, make sure you drain it by incurring eligible expenses before the deadline for this year. Otherwise, you’ll lose the remaining balance. It’s not that hard to drum some things up: new glasses or contact, dental work you’ve been putting off, or prescriptions that can be filled early. Also, for 2010, over-the-counter drugs still count. At GAI (www.gunwel.com) we can help you with this tax planning. Call us today at 212-979-6830 or stop by and we can discuss these numbers. See you soon!

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