Unused Flexible Spending Accounts Balances

Unused funds in a dependent care FSA at year-end can’t be carried over, IRS confirms privately. Nor can the FSA refund you the extra money, even if you know that you cannot use the funds by December because your child’s day care after-school program is shuttered as a result of the Coronavirus pandemic.

Earlier this year, the IRS allowed, but did not require, employers to amend their plans to allow participants in dependent care flexible spending accounts to elect midyear to cease making 2020 contributions or to reduce the amount of their 2020 payins.

Small Business Tax Strategies
December 2020