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IRS Provides Flexibility For Taxpayers

Posted by Admin Posted on May 14 2020

WASHINGTON — The Internal Revenue Service today released guidance to allow temporary
changes to section 125 cafeteria plans. These changes extend the claims period for
health flexible spending arrangements (FSAs) and dependent care assistance programs
and allow taxpayers to make mid-year changes.  

The guidance issued today addresses unanticipated changes in expenses because of the
2019 Novel Coronavirus (COVID-19) pandemic and provides that previously provided
temporary relief for high deductible health plans may be applied retroactively to
January 1, 2020, and it also increases for inflation the $500 permitted carryover
amount for health FSAs to $550.

Notice 2020-29 (PDF) provides greater flexibility for taxpayers by:

• Extending claims periods for taxpayers to apply unused amounts remaining in a health
FSA or care assistance program for expenses incurred for those same qualified
benefits through December 31, 2020.
• Expanding the ability of taxpayers to make mid-year elections for health coverage,
health FSAs, and dependent care assistance programs, allowing them to respond to
changes in needs as a result of the COVID-19 pandemic.
• Applying earlier relief for high deductible health plans to cover expenses related
to COVID-19, and a temporary exemption for telehealth services retroactively to
January 1, 2020.

Notice 2020-33 (PDF) responds to Executive Order 13877, which directs the Secretary
of the Treasury to "issue guidance to increase the amount of funds that can carry
over without penalty at the end of the year for flexible spending arrangements." The
notice increases the limit for unused health FSA carryover amounts from $500, to a
maximum of $550, as adjusted annually for inflation. 

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