Released: January 22, 2007

Spending your Flexible Spending Account

Source: Genevieve Bookwalter, Los Angeles Times (Free Registration)

For some people, a flexible spending account is a tax-free, no-interest loan to pay for laser eye surgery or in vitro fertilization.

For others, it’s money forgotten about until the end of the year, when they scramble for ways to spend thousands of dollars before losing the cash for good. Anything they don’t spend by a certain date will be kept by their employers.

If you’re scurrying to spend last year’s flex money before the deadline, there are many ways to do it. Flexible accounts “are quite popular because they are so easy for employees to use,” said Bob Scharin, editor of Warren, Gorham & Lamont/RIA’s Practical Tax Strategies, a monthly publication for tax professionals.

First, some background: Since the 1970s, employers have offered tax-free funds in which employees can stash a designated sum of money to pay for medical expenses. The money is withdrawn from paychecks throughout the year, but the total amount is available for employees on Jan. 1.

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