Dependent Care Flexible Spending Account FAQ's
What dependent care expenses are eligible?
This account permits you to use before-tax dollars for eligible dependent care expenses if you need to pay for dependent care services so that you, or you and your spouse, can work outside the home. Examples of eligible dependent care expenses include:
- Household services related to the care of your dependent.
- The care of your dependent in your home.
- The care of your dependent outside of your home if that dependent regularly spends at least eight (8) hours each day in your home.
The Internal Revenue Service allows you to participate in this account. To qualify for reimbursement of these expenses, the following rules must be satisfied:
- If the expenses are for your child, the child must be under 13 years of age and be claimed as a dependent on your income tax return.
- Other reimbursable expenses must be for your disabled spouse or other disabled individual who is your dependent for tax purposes.
- The services must be necessary to enable you, or if you are married, you and your spouse, to be employed or to go to school on a full-time basis.
- The services may be provided inside or outside your home, but not by someone who is your minor child or your dependent for income tax purposes.
- If services are provided by a day care facility that cares for six (6) or more children at the same time, it must be a licensed day care center.
- The amount reimbursed cannot be greater than the income you or your spouse earns, whichever is lower.
- The services must be for the physical care of the child, not for education, meals, and other service.
Your deposits to your Dependent Care Spending Account can range up to a maximum of $5,000 annually. It is important to remember that the maximum amount that you deposit cannot be greater than the income you or your spouse earns, whichever is lower.
What is the difference between the Dependent Care Tax Credit and a Dependent Care Flexible Spending Account
If you do not pay for all of your dependent care expenses from your spending account, you may be able to take a percentage of those expenses as a credit on your federal income tax return. For one dependent, you may be able to take a percentage of your un-reimbursed dependent care expenses up to $2,400 as a tax credit. If you have two or more dependents, you may be able to take a percentage of your un-reimbursed dependent care expenses up to $4,800 as a tax credit.
Keep in mind that you cannot use both the spending account and a tax credit for the same expenses. Furthermore, your expenses eligible for the tax credit will be reduced, dollar for dollar, by each dollar that is reimbursed from your spending account for dependent care expenses. However, you may be able to coordinate some of your dependent care expenses between the spending account and the federal tax credit. In order to examine your alternatives, you should consult with a tax advisor.
If you want to claim the tax credit or use the spending account, you must get IRS Form W-10, Dependent Care Provider's Identification and Certification, and give it to each of your care providers to fill out and return to you. This form should not be sent to the IRS. Instead, keep it with your records.
On the Form W-10, your care provider (unless tax-exempt) should provide you with its taxpayer identification number. If you claim the tax credit or use the spending account, you must supply the correct name, address and taxpayer identification number of your care provider(s) with your federal income tax return. If you do not furnish correct or complete information to the IRS, you will not be able to claim the tax credit or to use the tax-free spending account unless you show the IRS that you exercised due diligence in attempting to acquire the required information.
See IRS Publication 503, Child and Dependent Expense, for more information at http://www.irs.gov/pub/irs-pdf/p503.pdf for more information.
How do I plan my deposits?
Each year you must decide, in advance, what your deposit to your Dependent Care Account will be. However, any changes you make to your amount must correspond and be consistent with the event permitting the election change. For example: if you add a dependent, the deposit amount could increase. Events permitting a change include:
- Change in legal marital status, including marriage, death of spouse, divorce, legal separation or annulment.
- The Judgment, Decree or Order requiring a change in health coverage for your child.
- Change in the number of tax dependents, including birth, adoption, placement for adoption, commencement or termination of adoption proceeding, or death of dependent.
- Change in employment status of the employee, spouse or dependent including:
- Termination or commencement of employment;
- Commencement or return from an unpaid leave of absence;
- Commencement or termination of strike or lockout; or
- Change from salaried to hourly which causes or terminates eligibility under a plan.
- The dependent satisfies or ceases to satisfy the requirements for coverage due to attainment of age, student status or any similar circumstances as provided under the accident or health plan under which the employee receives coverage.
- A change in the place of residence or work site of the employee, spouse or dependent.
- A change in the spouse’s or dependent’s coverage under another employer’s plan including election and open enrollment changes.
- Gain or loss of Medicare or Medicaid entitlement.
- The taking of a leave under the Family Medical Leave Act (FMLA).
- Termination of employment for a period exceeding 30 days.
- Eligibility for COBRA continuation coverage by the employee, spouse or dependent under the University’s group health plan.
Should your family status change and you decide to begin, discontinue, or change the amount of your deposits, please notify the Human Resources Department within 30 days of the date of your family status change. The IRS requires that any money remaining in your account(s) at year-end must be forfeited. In order to maximize the tax advantages offered through the reimbursement accounts, you should estimate your health care and your dependent care expenses carefully before the beginning of each year.
What is the maximum allowable deposit?
If you decide to participate in this account, you must choose the amount of before-tax pay you want deposited to your account for the year.
Your deposits to the flex health care account can range from a minimum of $100 to a maximum of $2,500 annually for year 2013. Deposits into the Dependent Care flex account can range from a minimum of $100 to a maximum of $5,000 annually.
Your deposits are deducted from your pay before federal, state, and Social Security taxes have been deducted. This reduces your taxable income and your tax obligation.
How do I enroll?
Enrollment in these accounts will be possible only during the flexible spending open enrollment period which is one month each year (i.e., November). New hires may participate upon hire, however, a decision must be made and forms returned to Human Resources within 30 days of hire. Only expenses you incur on or after the first day of the plan year, i.e., January 1st (or your participation in this plan, if later) will be eligible for reimbursement.
How am I reimbursed?
Use your takecare® VISA® card to pay for eligible expenses. If your daycare provider does not accept the takecare® VISA® card, follow the steps outlined at takecarewageworks.com to file a manual reimbursement.