This is a guest post from Chad over at GoingGazelle. Chad is a volunteer Financial Peace University coordinator and a volunteer Crown Money Map Coach.
IIAS Flexible Spending Accounts: Swipe Twice & Reduce Your Taxes!
A lesson in Personal Finance from a Wal-Mart Cashier
I wish I could tell you my vast knowledge of Personal Finance led me to discover and write this tip. However, this post was driven by a lesson from a Wal-Mart cashier. My wife accidentally used her Flexible Spending Account debit card to pay for some purchases instead of our normal debit card. We had some Tums and Dora the Explorer Band-aids in the cart. The Wal-Mart register recognized those two items were approved for FSA and debited them from the FSA account. The rest of the materials we had to pay for by swiping a normal debit card or pay cash.
The cashier then explained that their register system was “smart” enough to allow us to pay for FSA reimbursable materials with some types of FSA debit cards. Because the approval took place at the point of sale, we no longer had to submit receipts for items purchased at Wal-Mart. I didn’t even realize that either item would be approved as an FSA expense.
The original FSA programs work like this. Your employer deducts money from your pay check tax free and put into a savings account with an FSA vendor. You would go out buy items, track all of your receipts, mail or fax them in and wait for approval. The FSA company would manually look through your receipts, if the expenses were allowed, they would mail you back a refund check. In essence, any approved health care expenses were paid for with tax free income. It is small bit of a paperwork, but worth the hassle in my opinion.
Then FSA vendors improved their services by issuing Visa or Mastercard branded debit cards which you could pay for health care services. Instead of paying out of pocket and seeking reimbursement, you can use the FSA debit card at the merchant to pay for the item. No cash out of pocket. You only had to mail in or fax back the receipt. Every transaction on the debit card had to be supported by mailing in paperwork. Again the FSA vendor would manually review the paperwork and approve each transaction. If you used the debit card for an unapproved expense you had to mail them a check for that amount of money.
Welcome to the new standard: Inventory Inventory Approval System – IIAS
Now the FSA vendors have worked out a point-of-sale approval system with major retailers such as Wal-Mart, CVS Pharmacy and Walgreens. Every item in the store is evaluated to see if it meets federal FSA reimbursement guidelines. The register system now knows which items are approved by the government for FSA account purchases.
When you use an IIAS debit card at Wal-Mart, it only allows you to pay for the items approved by the Federal government. By automating the approval at the Point-of-Sale, the consumer does NOT have to fill out forms and submit paperwork any more. The FSA vendor does not have to manually verify that paperwork. This makes life easier on the consumer and the FSA vendor. (Its always a good idea to keep receipts just in case).
The IIAS system went into effect on January 1st, 2008. The list of IIAS approved FSA administrators and merchants is growing. The next time open enrollment comes around. Check out your employer’s FSA options. Tax reductions are getting hard and harder to come by.
If you are lucky enough to have an IIAS administrator of your FSA, when shopping at Wal-Mart or any other IIAS merchant, swipe the FSA card first and see what happens to be in your basket that the government will let you purchase with tax free income. Our family has been doing this for about a month. We’re amazed at how many items we normally purchase quality for this tax reduction measure.
Click for more information about IIAS Flexible Spending Accounts