Extending the 2019 tax deadline into June isn’t the only way the Internal Revenue Service (IRS) is becoming more flexible this year amid the COVID-19 pandemic.
Yes, in addition to moving tax day from April to June to allow Americans more time to file during these unprecedented times, it’s loosening standards in several additional ways. There are two major changes you need to know when it comes to IRS flexibility in 2020, and they pertain to health care and your Flexible Spending Account (FSA). Here’s an overview of each of these changes and how it impacts you:
Typically, American workers only have one period each year to select their benefits for the forthcoming calendar year. This period, known as “open enrollment,” comes in November and allows workers to elect their health plans, select dependents they want added to their health plan and more.
After finalizing their elections during the open enrollment period, they’re typically not able to make any changes unless they have a qualifying life event (i.e., birth of a child, marriage, etc.) until the next year’s open enrollment period. Due to the job loss that has taken place during this pandemic, the IRS is allowing workers to make mid-year changes to their health plans.
Say, for instance, that your spouse lost their job and their health benefits. That’s where something like this would come in handy – as you’d be able to add them to your employer’s plan well before they’d be eligible in 2021. Additionally, employees can also drop their current employer health plan under this rule if a better or more affordable option has become available to them.
Flexible Spending Accounts
Workers designate the money they want put toward their Flexible Spending Accounts during the open enrollment period, and can’t make any changes to this per-paycheck, pre-tax allotment throughout the subsequent year after it’s finalized. The IRS is loosening restrictions on this too. Specifically, American workers can now make mid-year changes to their FSA per-paycheck allocations.
For example, if you’re hunkering down and don’t anticipate as many medical expenses, or if you’re not relying on child care services as much while you’re working from home, you may choose to reduce what gets put toward your FSA and increase the amount of your paycheck. Additionally, the IRS is extending the carryover period of the use-it or lose-it FSA account from three months to six months. It’s also slightly increasing the carryover amount that workers are eligible to roll over from year to year.
Every Case is Different
It’s worth noting that allowing these changes are up to each specific employer, as they may add to overhead administrative costs – so be sure to check with your HR department before you assume anything. But it’s refreshing – albeit out of character – to see the IRS loosen restrictions in such a trying time for so many Americans.