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Discussion Forum Index --> Advanced Tax Questions --> Taxability of FSA reimbursement after termination
Discussion Forum Index --> Tax Questions --> Taxability of FSA reimbursement after termination
LSC CPA (talk|edits) said:
| 19 February 2008
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| I have a client who was terminated from their job 1/31. They had elected to have $5,000 taken from their pay to contribute into their flexible spending account for 2008. They had only contributed $400 in January but are able, through COBRA, to continue their FSA on COBRA, though it will be post-tax. So they sent in $400 for February and are now able to submit expense reimbursements this month for the full $5,000. Since he will have only contributed $800 into the FSA (he plans on doing this for only one month - he is disabled and will be purchased medical equipment, eyeglasses, etc. to take advantage of this) - will anything that he will be reimbursed OVER the $800 be taxable to him???? I know that the employer risk is one of the things that makes this program work, so the excess would be lost to the employer. Just don't know how this would impact the former employee who takes advantage of this. Has anyone out there encountered this before?
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RJM (talk|edits) said:
| 19 February 2008
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| Have been thru this. There is no tax as long as the proceeds are used for qualifying medical expenditures under the Plan. For tax purposes the $5000 is considered insurance proceeds.
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Natalie (talk|edits) said:
| February 20, 2008
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| Lucky guy. That's one of the really nice things about the plan (no tax).
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