Public Employee Press

Two easy ways to save on your federal taxes

Can you imagine union members calmly watching dollar bills going down the drain? Members who are eligible for the “flexible spending” benefits that DC 37 has negotiated with the city, but do not participate, are doing just that, except that instead of down the drain, their hard-earned money is going straight to Washington.

The sign-up period is now through mid-November for two programs that can help you save money:
The Dependent Care Assistance Program (DeCAP) lets you use pre-tax dollars to pay for care for your children or other dependents, including elderly parents, if they are part of your household.

How does it work? For DeCAP and all such plans, money is deducted from your paycheck before federal and Social Security (FICA) taxes are taken out and deposited into your DeCAP account, reducing the taxable income on your W-2 form. The minimum annual contribution is $500 and the maximum is $5,000.

Next, you submit a claim form, with receipts for any eligible dependent-care expenses you incur. Then you are reimbursed from your DeCAP account with money that is free of federal and FICA taxes.

DeCAP helps you plan for anticipated dependent-care expenses and reduce your gross salary for federal and Social Security tax purposes. The tax savings mean that you keep more of your hard-earned money!

How to sign up for DeCAP
The annual enrollment period for 2008 extends through Nov. 16, 2007. To enroll in DeCAP, get an FSA Enrollment/Change Form for 2008 from your agency’s benefits office, download it from the city Office of Labor Relations Web site at www.nyc.gov/olr (click on Flex Spending Programs) or call the FSA office at 212-306-7760.

Members can also save money by enrolling in the Health Care Flexible Spending Account (HCFSA). With this account, city employees can pay for eligible out-of-pocket medical, dental, vision, and hearing expenses, as well as prescription co-pays and over-the-counter drugs like Tylenol, on a pre-tax basis, with deductions taken directly from their salary. The deductions reduce the gross income on your W-2 form for federal and Social Security taxes.

To get started, carefully estimate your eligible health care expenses for the coming year, because if you don’t use all the money in your account by the end of the year, the unused funds are forfeited.

The minimum annual contribution to the HCFSA is $260 and the maximum is $5,000. Enrollment runs through mid-November.

To find out how much money you can save with these plans, try out a “payroll calculator” at the OLR Web site or visit the Web site of the Office of Payroll Administration at www.nyc.gov/html/opa/home.html. Have last year’s W-2 or tax forms handy so you can easily fill in the numbers on the calculator and see your savings in advance.

City employees can also save money by using the Transit Benefit Program and invest money in two deferred compensation plans, which have year-round enrollment. PEP will publish more information on these plans next issue.