The following was taken from an ACO chat in January, 2011. The original question was: What does anyone know about using a Flexible Spending Account to pay for coaching? Ose Schwab responded:

How I Have Used Flexible Spending

I believe one of my clients has used it for his son’s coaching. An individual typically sets up a before taxes account and then pays himself back for expenses incurred, assuming the expenses are allowable under this plan. In previous years, there was an allowance for tutoring for example. Some of the allowances are not so rigid, but one must make a case for it. Take a look at here and see what you can find. I know for sure that my client received from me a year-to-date statement of payments. I believe he used that to submit for reimbursement.

What is a Flexible Spending Account?

Review website https://www.fsafeds.com/fsafeds/summaryofbenefits.asp#WhatIsFSA

A Flexible Spending Account (FSA) is a tax-favored program offered by employers that allows their employees to pay for eligible out-of-pocket health care and dependent care expenses with pre-tax dollars. By using pre-tax dollars to pay for eligible health care and dependent care expenses, an FSA gives you an immediate discount on these expenses that equals the taxes you would otherwise pay on that money.

In other words, with an FSA, you can both reduce your taxes and get more for your money by saving from 20% to more than 40% you would normally pay for out-of-pocket health care and dependent care expenses with after-tax (as opposed to taxed) dollars.

FSAFEDS Offers Three Types of FSAs:

* The Health Care Flexible Spending Account (HCFSA), which can be used to pay for qualified medical costs and health care expenses that are not paid by your Federal Employees Health Benefits (FEHB) plan or any other insurance. PLEASE NOTE: A HCFSA cannot be used to pay for any type of insurance premiums, including long-term care insurance premiums.

* The Limited Expense Health Care Flexible Spending Account (LEX HCFSA), only available to employees who enroll in a Federal Employees Health Benefits (FEHB) Program under a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). Eligible expenses are limited to dental and vision care services/products that meet the IRS definition of medical care. By using a LEX HCFSA, you can preserve the funds in your Health Savings Account to use/save for other purposes.

* The Dependent Care Flexible Spending Account (DCFSA), used to pay for eligible dependent care expenses such as child care for children under age 13 or day care for anyone who you claim as a dependent on your Federal tax return who is physically or mentally incapable of self-care so that you (and your spouse, if you are married) can work, look for work, or attend school full-time. For more information, refer to Do I, or my spouse if married, have to earn income during the year to use a Dependent Care FSA (DCFSA)?

To learn more, visit the FSAFEDS Video Library and watch “The Three Types of Accounts“.