Information on FSAs for 2011

As of Jan. 1, 2011, the following new rules are in effect for reimbursements of various health care costs from flexible spending accounts (FSAs) and other health reimbursement arrangements:

1.  The cost of over-the-counter medicines or drugs purchased in 2011 cannot be reimbursed unless they were purchased using a prescription.

2.  Can eyeglasses be reimbursed in 2011 without a prescription? contact lenses?  Yes

3.  Can co-pays be reimbursed in 2011? deductibles?  Yes

4.  The place where a taxpayer earns income is considered that person’s tax home.

5.  Business travel expenses are deductible by an individual or reimbursable to an employee tax free only when incurred while temporarily away from the tax home, which means no more than one year.

6.  Is it possible for an employer with 20 full-time employees and 9 part-time employees to qualify for the health-care tax credit in 2010? Yes

7.  Effective Jan. 1, 2011, advance EITC payments will be claimed by recipients on their 1040 instead of receiving them from their employer.

8.  A credit card statement is not proof of the business purpose of an expense. This requires receipts or other evidence that serve to demonstrate the exact nature of the purchase and why the expenditure was ordinary and necessary  for the business.

9.  When filling out a 1099 for an independent contractor, for an individual, use the person’s legal name. For a D/B/A, partnership or other business entity, use the entity’s name.

10.   Predating and postdating paychecks is prohibited under the doctrine of constructive receipt