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Review Your Health Care FSA Before Year End
If you have an employer-sponsored Flexible Spending Account (FSA), now is a good time to check your balance. FSAs allow you to pay eligible health care expenses with pretax dollars, but they’re generally subject to a “use-it-or-lose-it” rule.
For 2026, the plan may allow you to carry over up to $680 of unused funds to 2027. Alternatively, it may provide a grace period of up to 2½ months after the year ends to incur eligible expenses. For a 2026 calendar-year plan that has a grace period, that period ends March 15, 2027. A plan can’t offer both a carryover and a grace period — only one or neither.
If you have a calendar-year plan and expect to forfeit funds, consider using the funds for eligible expenses before December 31, 2026. Some examples are deductibles and co-payments, dental and vision care (including glasses and contacts), medications and certain medical supplies.
IRS Updates Travel Per Diem Rates
The IRS has released its 2026–2027 per diem rates for certain business travel expenses, effective October 1, 2026. Under the high-low substantiation method, the rate for lodging, meals and incidental expenses for travel to high-cost localities within the continental United States (CONUS) rises to $329 per day, from $319. The rate for other CONUS localities rises to $230, from $225.
The portion attributable to meals remains $86 for high-cost areas and $74 for other areas. The incidental-expenses-only rate remains $5. Employers can pay more than the IRS per diem rates, but excess amounts generally must be substantiated or treated as taxable wages. Contact the office if you have any questions.
COVID-Era Tax Penalty Relief Denied?
Taxpayers who filed a refund or abatement claim based on Kwong v. United States may receive a denial from the IRS. In this case the court found that the IRS improperly assessed certain penalties and interest during the COVID-19 pandemic. The IRS has denied some Kwong claims, but that doesn’t necessarily end the matter. Litigation is ongoing.
If you received a denial letter, keep your records and check applicable deadlines. A formal claim disallowance notice generally starts a two-year period to file a refund lawsuit. If your abatement request was denied and you later pay the disputed amount, you may still be able to file a refund claim. Different rules apply to unpaid amounts. Don’t ignore collection notices. Contact the office for help reviewing your options.
