IRS Cafeteria Plans Tax Relief through Increased Flexibility in Section 125; The Internal Revenue Service (IRS) allows temporary changes to section 125 cafeteria plans that provides guidance on increased flexibility for taxpayers. According to the changes, the claims period for health flexible spending arrangements (FSAs) and dependent care assistance programs are extended. Not only this, taxpayers are also allowed to make mid-year changes with the IRS tax relief through increased flexibility in section 125 cafeteria plans. To know more details, check the complete post below.
IRS Tax Relief through Increased Flexibility in Section 125 Cafeteria Plans
The IRS issued guidance on expected changes in expenses due to the impact of the 2019 Novel Coronavirus (COVID-19) pandemic throughout the United States. The IRS has also allowed High-Deductible Health Plans to cover coronavirus costs previously. With the latest IRS tax relief through increased flexibility in section 125 cafeteria plans, that previously provided temporary relief for high deductible health plans (HDHPs) may be applied retroactively to January 1, 2020, and it also increases for inflation the $500 permitted carryover amount for health flexible spending arrangements FSAs to $550.
Notice 2020-29 (PDF) clearly illustrates IRS tax relief through increased flexibility in section 125 cafeteria plans by means of the following actions:
- IRS tax relief through increased flexibility in section 125 cafeteria plans extends claims periods for the taxpayers to apply unused amounts remaining in a health FSA or dependent care assistance program for expenses incur for those same qualified benefits through December 31, 2020.
- IRS tax relief through increased flexibility in section 125 cafeteria plans also expands the aptitude of taxpayers to compose mid-year elections for health coverage, health FSAs, as well as dependent care assistance programs, which allows them to act in response to changes in needs due to the COVID-19 pandemic in USA.
- IRS tax relief through increased flexibility in section 125 cafeteria plans apply previous relief program for high deductible health plans to cover expenses concerning coronavirus, as well as a short-term exemption for tele-health services retroactively to January 1, 2020.
Notice 2020-33 (PDF) fulfills Executive Order 13877 that instructs the Secretary of the Treasury to “issue guidance for increasing the amount of funds that can postpone without penalty at the end of the year for flexible spending arrangements.” As per the notice, the limit for unused health FSA carryover amounts is increased from $500 to a maximum of $550, as adjusted for inflation once a year.
Apart from IRS tax relief through increased flexibility in section 125 cafeteria plans, the Internal Revenue Service is providing different coronavirus relief programs for the taxpayers. Contact us to prepare and file your taxes in USA by making the most of IRS COVID-19 tax relief.
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