My $413 Mistake
Now the 2005 benefit enrollment season is over, I just realized I had a chance to do better. It looks like I made a $413 mistake in my Flexible Spending Account selection.
If you read my discussion on my benefit choice for Flexible Spending Account (FSA), you know I opt for $5,000 in Dependent Care FSA and $1,400 in Healthcare FSA. What I didn't disclose, is I enolled $5,000 Dependent FSA and $400 Healthcare FSA under my name, and signed up $1,000 Healthcare FSA under my wife's name. At that time, I didn't think this can make a difference.
It actually can.
Why? Because I just realized FSA is shield from Social Security Tax too. In the case of my family, my annual job income well exceed the 2005 annual threshold of $90,000. Even if I can deduct $5,400 before social security tax, I still have to pay the 7.65% on $90,000, not a cent less.
If I had enrolled the $5,400 under my wife's name, because her income is well below the $90,000 limit, every dollar enrollment will save 7.65 cents upfront. At $5,400, it adds up to a total of $413, enough for a lot of dining-outs.
If you are in the same situation, I hope your benefit enrollment has not finished yet and you can learn from my experience. Yes, for double-income family, it can still make a difference as of who signs up for which part of the benefit.
I am hereby announcing that this year, I will pay my tax by credit card. According to my estimate, I owe Uncle Sam ahywhere between $700 and $800 for the tax year 2004 thanks to my careful withholding planning. But with more than $30,000 burning ... Read
If you follow my discussion of sales tax deductability (here, here, here and here), you might ask one more question: as tax filers can choose to use IRS's table to claim state sales tax deduction, or save all receipts and claim the actual sales tax ... Read
A week ago, I was expecting a $650 windfall by exploiting some benefit enrollment loopholes associated with my wife's recent employment (see Year-End Tax Stunt). Unfortunately, I was outbeat by certain terms in the Plan. The $650 benefit is now reduced to $75. Read
I'm in the process of pulling out a year-end tax stunt, which, if successful, will reduce my 2004 federal income tax by more than $600. I am not 100% sure it will work, but I do put high hopes on it. Read
