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I'm trying to determine how much I should put into my flex spending accounts (FSA) for next year. Enrollment is this month. In making that determination, I am unsure of the following situation.

Both of my daughters have had orthodonic work done this past month. The orthodontist allows us to pay for the braces over an 18 month period without interest if we make an initial downpayment. They will allow the downpayment to be delayed until January. We took this option. The situation is a little confusing for me in that the orthodontic office submitted the charges to my dental insurance. The dental insurance has then reimbursed us for charges that will not be billed personally to us until January. Below is a simplified summary.

9/2005 Some services rendered (braces installed)
10/2005 $1400 charge submitted by orthodontic office to insurer.
10/2005 $900 reimbused to us by insurer
1/06 $500 due of $1400 charge to orthodontic office
1/06 - 12/06 $500/month payment for overall charges (amount spread over 18 months)

My concern is that although the orthodontic office said we don't owe anything until 2006 for services done in 2005, they billed the insurance company in 2005. Therefore the unreimbursed part ($500) of the bill falls in 2005 even though payment isn't due until 2006.

Question: Can the $500 unreimbursed part of the bill be paid in January from 2006 FSA funds since that is when I am being billed or does it fall into 2005 since that is when the orthodontic work was done?

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