Over The Counter Tax Break

ANCHOR LEAD
PAYING THE DEDUCTIBLE FOR PRESCRIPTION DRUGS CAN BE TOUGH, BUT WHEN THOSE DRUGS BECOME OVER THE COUNTER MEDS...AND YOUR INSURANCE COMPANY NO LONGER COVERS THEM...IT CAN BECOME EVEN TOUGHER.
BUT HEADS-UP...THERE'S A LITTLE-KNOWN BREAK YOU CAN TAKE...AND IT MEANS MORE MONEY IN YOUR POCKET. HERE'S SCOTT HANSON.

NAT SOUND
(Kelly taking pill)

TRACK ONE Length: :04
GRAD STUDENT KELLY MCCOY TAKES MEDICATION TO HELP HER COPE WITH SEASONAL WITH ALLERGIES.

SOT
KEY @: :06 Kelly McCoy, Takes Claritin D
"I was taking Claritin D for five years..."

TRACK TWO Length: :11
BUT LIKE SO MANY OTHER PRESCRIPTION DRUGS, CLARITIN D HAS GONE OVER THE COUNTER. THAT MAY MAKE IT READILY AVAILABLE... BUT FOR KELLY, IT MEANS DOLING OUT A LOT MORE THAN THE TEN DOLLAR MONTHLY COPAY. NOW IT'S...

SOT
KEY @: :19 Kelly McCoy, Takes Claritin D
"Twenty five dollars for ten pills."

TRACK THREE Length: :20
WHICH COMES TO AN ADDITIONAL 65 DOLLARS EACH MONTH.
BUT THERE IS A WAY TO SAVE...
AND IT INVOLVES SOMETHING CALLED A FLEXIBLE SPENDING ACCOUNT.
HERE'S HOW IT WORKS...
YOU CONTRIBUTE A SPECIFIC AMOUNT OF YOUR PAYCHECK INTO A SPECIAL ACCOUNT SET UP BY YOUR EMPLOYER... THAT MONEY IS EXEMPT FROM STATE AND FEDERAL TAXES...AND CAN BE USED THROUGHOUT THE YEAR FOR MEDICAL COSTS.

SOT
KEY @: :40 Donna LeValley, Tax Attorney
"It really gives a place for the tax payer to get some additional savings."

TRACK FOUR Length: :10
AND THE FEDERAL GOVERNMENT HAS MADE THIS BENEFIT EVEN MORE ATTRACTIVE... NOW YOU CAN PAY FOR NON-PRESCRIPTION DRUGS WITH YOUR F-S-A.
THE TIMING COULDN'T BE BETTER...WITH MORE DRUGS GOING OVER THE COUNTER.

SOT
KEY @: :54 Donna LeValley, Tax Attorney
"The consumer benefits from the IRS ruling by opening up a whole new area of tax-free reimbursements."

TRACK FIVE Length: :22
CLIENT NOTE:
According to tax attorneys Donna LeValley and Michael Semes, an average family of four, in the 25% tax bracket, can save about fifty dollars in one year if they spend 200 dollars for one OTC drug and use an F-S-A to pay.
AN AVERAGE FAMILY OF FOUR, IN THE 25% TAX BRACKET, SHELLS OUT 200 BUCKS A YEAR FOR JUST ONE OVER THE COUNTER DRUG. BY PAYING WITH AN F-S-A, WHICH IS PRE-TAX MONEY, THEY CAN SAVE ABOUT FIFTY DOLLARS.
THERE IS A CATCH. YOU HAVE TO SPEND ALL THE MONEY IN YOUR F-S-A BEFORE THE END OF THE YEAR OR YOU LOSE IT. BUT EXPERTS SAY THIS RULE CHANGE MAKES IT EASIER THAN EVER TO CASH OUT.

SOT
KEY @: :1:21 Donna LeValley, Tax Attorney
"You can buy yourself a pair of glasses...load up on some over the counter medications..."

TRACK SIX Length: :06
KELLY'S PARENTS SAY THEIR F-S-A IS A REAL MONEY SAVER...AND WHEN SHE 'S ON HER OWN, KELLY PLANS TO OPEN ONE, TOO...

SOT
KEY @: 1:32 Kelly McCoy, Takes Claritin D
"It's money I can save for buying the medication that I need."

STAND-UP CLOSE :15
YOU CAN ASK YOUR HUMAN RESOURCES DEPARTMENT IF YOUR COMPANY OFFERS FLEXIBLE SPENDING ACCOUNTS. WHEN YOU SIGN UP, BE SURE TO SPECIFY YOU WANT A MEDICAL SAVINGS ACCOUNT BECAUSE THE GOVERNMENT ALSO ALLOWS DEPENDENT CARE ACCOUNTS...EACH HAS A DIFFERENT MAXIMUM DEDUCTION.
FOR HEADS UP! I'M SCOTT HANSON.

ANCHOR TAG
SOURCE:
This information was gathered by the Congressional Research Service for the United States Congress in July 2003.
FOUR OUT OF FIVE MEDIUM AND LARGE BUSINESSES OFFER
F-S-As...BUT ONLY 18 PERCENT OF ALL ELEIGIBLE WORKERS TAKE ADVANTAGE OF THIS BENEFIT.

SOURCES

Donna LeValley
Contributing Editor, JK Lasser's Tax Guide
201-748-6882

Donna LeValley is a contributing editor for JK Lasser's Tax Guide. JK Lasser offers easy-to-follow, expert advice and guidance on planning and filing your taxes.

Grace Weinstein
Financial consultant
(201) 568-4295

Grace is a financial consultant and author of numerous books regarding financial matters and taxes.

Michael Semes
(215) 569-5476

Michael is a tax attorney.