DECATUR, Ga. -- Small purchases add up fast when it comes to using up your health care flexible-spending account, or FSA, by the end of the year.
About 35 million Americans have their employers deduct a portion of their paycheck into a health care FSA, according to the Employers Council on Flexible Compensation.
The benefit is that income isn't subject to payroll taxes, but the down side is you must use all the money in your account for medical expenses or you forfeit funds that are left over at the end of the year.
Before you panic about still having money in your account late in December, check your employer's rules this week to see whether all purchases must be made by the end of the year.
Many plans have a grace period that gives you extra time in the following year to use up the money and submit documentation, said Jody Dietel, chief compliance officer at WageWorks, a third-party administrator of tax-advantaged benefit programs.
However, if you follow these 11 tips, you may find it easy to spend your FSA quickly. And remember, even if you do not fully tap out your FSA, you're still most likely coming out ahead financially due to the substantial tax savings, Dietel said. "Take a deep breath and put it into perspective," she said.
1. Review your receipts
Before you start shopping, gather up your medical receipts and ensure you've submitted all eligible ones to your employer, Dietel said. Because so many health purchases qualify and medical expenses are rapidly rising, many people may have reached their account limit without knowing it, she said.
"Review your expenses, go through your checkbook and credit-card statements," Dietel said. "In the vast majority of cases, people are shocked at what they have spent on over-the-counter health care."
2. Call for documentation, if needed
Confused over which medications, services and supplies do and don't qualify?
You're not alone. Almost 80 percent of household decisionmakers had difficulty identifying what medical expenses could be paid with FSA funds, according to a 2010 survey by Save Smart, Spend Healthy, a consumer education program on pre-tax employee benefit accounts founded by WageWorks.
"The big thing is 'what is the IRS's definition of a medical cost?' But that's still pretty broad," said Robert Walsh, a certified public accountant and president of Red Bank, N.J.-based Lighthouse Financial Advisors Inc. "There are no home runs (but) a lot of little things that add up."
To complicate matters further, in 2011 many over-the-counter items now require a prescription or doctor's letter of medical necessity to be FSA-eligible.
Call soon for that documentation before physicians leave on holiday vacations, but if your doctor is out, ask for a nurse practitioner or physician assistant who may also be able to write prescriptions, said Mary Canning, dean of Golden Gate University's School of Taxation and Accounting in San Francisco.
If you're not sure which items need extra paperwork, ask your employer benefits manager or insurance provider. Many employers and providers post FSA information online. A list is also available at SaveSmartSpendHealthy.com.
3. Restock the first-aid kit
If you don't have a first-aid kit in your home, office and car, a doctor likely will be happy to write a letter of necessity for such a basic safety item, Canning said. If you already have a first-aid kit, check to see if it needs to be restocked and remember that even the Hello Kitty bandages your daughter loves qualify, Dietel said.
4. Invest in a blood-pressure monitor
If you or a family member has a history of high blood pressure, a blood-pressure monitor might be a prudent and slightly pricier purchase, Dietel said. Digital systems range from about $25 to more than $100 on Amazon.com.
5. Buy extra glasses, hearing-aid batteries
Another stand-by is a new pair of eyeglasses or extra boxes of contact lenses, and don't forget that appointment, often not covered by insurance, with an ophthalmologist or optometrist to get an updated prescription, Walsh said.
Also, consider scheduling a tune-up appointment for hearing aids. Another idea: Purchase extra batteries for your hearing aid, or buy a telephone for the hearing-impaired, he added.
6. Breathe easier
Spring allergy season may be months away, but consider stocking up now on allergy medications or air filters, Canning said.
"For individuals who have allergies that affect their breathing, it may be easy to call their doctor and get a prescription for additional air filters," she said.
7. See the dentist
Due for a routine teeth cleaning in 2012? Consider moving up that appointment, or invest in preventive care such as replacing aging cavities to forestall your risk of a root canal and crown later, Canning said.
"We baby boomers all have old fillings, and it's just a matter of time before they start to crack," she said.
However, remember that teeth whitening and other cosmetic dental procedures are not eligible FSA expenses.
8. Get a flu shot
You're healthy, busy and don't enjoy needle jabs, but remember, the co-pay for flu vaccines and other routine immunizations could be just the shot in the arm to help you reach your FSA limit, Dietel said.
9. Prioritize wellness
Health club and gym memberships to improve your general health don't qualify for FSA reimbursement, but a weight-loss program, over-the-counter drugs for weight loss, a pedometer or home exercise equipment are eligible -- with a doctor's letter of medical necessity.
Other wellness ideas include a smoking-cessation program or a massage if it's prescribed to alleviate muscle strain.
10. Tap into alternative medicine
Cosmetic surgery, hair restoration and marriage counseling are out. But fees paid to a holistic doctor, acupuncturist or Christian Science practitioner may qualify for FSA reimbursement, Walsh said.
11. Don't forget mileage
Remember that the miles you drive to and from qualifying appointments and drug stores or pharmacies to procure medications count.
In 2011, the medical mileage rates were 19 cents per mile for Jan. 1 to June 30 and 23.5 cents per mile for July 1 to Dec. 31.