The federal government has found another way deep in the nooks and crannies of tax codes to help taxpayers in financial pain from the coronavirus epidemic.
The Internal Revenue Service now is allowing mid-year changes to “cafeteria plans,” such as health Flexible Spending Arrangements (FSA), so that workers who use them can deal with losses of income, unexpected bills and, perhaps, postponements of health care appointments.
Typically, the employees must tell employers which cafeteria plans they wish to use and how much of their wages to place in them during a firm enrollment period each year. The money goes into the plan free of federal income tax, and the employee can claim it for their spending on health care, child care or other items covered by the plans.
Because of financial burdens due to coronavirus, the IRS effectively has allowed employers to reopen enrollment periods for the plans. Consequently, employees will be able redo their choices of health FSAs and dependent care programs and retain the tax exemption for wages in them.
In addition, taxpayers can use any unspent money left in their plans from last year through Dec. 31, 2020. Normally, the deadline might be in March, depending on the plan.
Employees also now can claim expenses for telehealth services back to Jan. 1 of this year. Another new rule also allows people with health plans that have high deductibles to avoid that cost-sharing for any coronavirus-related expenses after Jan. 1, 2020.
Of course, workers will need to check into the changes with their employers, who actually offer the cafeteria plans.
For more guidance on approaches to cafeteria plans, feel free to contact Eric Buechler, founder and owner of EricJohn Ltd., for guidance in your specific situation.