Dependent Care Spending Account - -Daycare

[katygirl]

Question: My husband gets money pre-tax taken out of his check to pay for (a portion of) our daughters daycare. The maximum he can have taken out is $5,000 dollars a year. Our daycare is more than $5,000 a year. My work also has this option; can I also have money taken out pretax? Is $5,000 the maximum that a “family” can have taken out or just the max an individual can have taken out?

I’ve tried calling MY HR department regarding this but I am a teacher and our HR department, isn’t that savvy. They say check with the IRS….

Can anyone offer help?

Thanks!

[jabelt]

I believe it's only one per family.

[RunnerKim]

Sigh - it's per family. We accidently had more than $5000 taken out since DH and my benefit years are different and we could only claim $5000. Adding another kid doesn't increase the amount either. We pay way more than that in daycare fees per year - not sure why the amount is set so low. Maybe when we're just doing after school care that will be adequate :rolleyes:

Kim

[katygirl]

Editing to say I just found this

What does it mean though.... :o

By law, the maximum amount you may allot for a DCFSA is $5,000 per household ($2,500 if married filing separately). You could exceed the $5,000 limit if both you and your spouse work for employers offering an FSA and the combined total of the allotments you each elect for a DCFSA goes beyond the applicable limit of $5,000. So, it is important you plan carefully.

[tbb113]

Maybe when we're just doing after school care that will be adequate :rolleyes:

Kim
Only if you don't do summer camp! Camp here averages $250 a week per child (10 weeks of summer, $2500). Sigh...no wonder I don't get to go on vacation. My kids go to camp :rolleyes:

[RunnerKim]

Tyra! I don't know what - I just wanted to yell :( sigh. I wonder if I'll be able to tolerate shipping them off to the grandparents for a couple of weeks (but then that's probably the same cost considering air fare these days. Maybe I can convince the grandparents to pay!)

KatyGirl - I read that to mean exactly what we've been saying here.

If you're married and filing jointly you can take up to $5000. if you're filing seperately then each of you can take $2500 (so still a total of $5000). It gives a warning that you might be able to have more than $5000 taken out if both jobs offer the benefit but that you can only claim $5000. That's exactly what happened to DH and I. We had something like $7500 witheld for one tax year and could only claim $5000. It wasn't a big deal in the end for us tax-wise, but potentially it could be for someone.

Kim

[blazedog]

Editing to say I just found this

What does it mean though.... :o

By law, the maximum amount you may allot for a DCFSA is $5,000 per household ($2,500 if married filing separately). You could exceed the $5,000 limit if both you and your spouse work for employers offering an FSA and the combined total of the allotments you each elect for a DCFSA goes beyond the applicable limit of $5,000. So, it is important you plan carefully.

Exactly what it says -- $5000 per household with a warning that you might wind up over-deducting if you have two separate employers deducting so you should make sure you don't exceed the annual total of $5000.

The maximums are set as a compromise between providing a tax break and not impacting revenue.

If you have a problem I would suggest taking it up with the current Administration which has given huge tax breaks to those making more than $1,000,000 dollars per year or with multi-million dollar investment portfolios while the middle and working classes are forced to pay a higher proportionate share of costs.

[katygirl]

Thanks guys.

I guess I was caught up in the fact that it said "You can exceed the $5,000 if blah, blah, blah," I was so looking to exceed....

I think I get it!

[DmOrtega]

When we used this, it was $5000/per family for the year maximum. It helps with reducing your taxes because it's pretax money like a 401k put aside to help offset child care costs. Unless you have extenuating circumstances, the deductions will continue for the entire year whether you file the claim or not.

The total amount taken for the year will be divided by 12 months. 5000/12=416.67/per month. If you get paid twice a month, it's 208.34/per paycheck. Your reimbursement is based on the amount you've paid for child care. So plan for the deduction from your pay as well as paying for the child care.

You will be reimbursed after the claim is filed, which means you will have to have a receipt to submit. Your reimbursed amount will be for whatever amount is in your account at the time. This means if you pay 500 for the first month of child care and you have only had 208.34 deducted to date from your pay, your reimbursement will be 208.34. File the claim for the full amount and after the next paycheck you will be reimbursed the difference.

It is a little confusing when you begin but it all works out in the end. The cycle is : Deduct the monthly amount from paycheck, pay the child care, get a receipt, file the claim, get the reimbursment check.

I understood that summer programs, that are all day programs, would qualify as well as tradional child care programs. You can call the phone number on the claim forms for information on what you can file a claim for.

For us once we got the hang of it, the program worked pretty well. It really is a matter of not over deducting when you sign up. If you under deduct, you can get some tax money back, on the difference, when you file your taxes at the end of the year.

[Sarah428]

So plan for the deduction from your pay as well as paying for the child care.

Your reimbursed amount will be for whatever amount is in your account at the time. This means if you pay 500 for the first month of child care and you have only had 208.34 deducted to date from your pay, your reimbursement will be 208.34. File the claim for the full amount and after the next paycheck you will be reimbursed the difference.
This is the 1st year we've used our DCSA and this is the only thing I don't like. Unlike our health care acct that starts out w/ $5K in at on 1/1/06 the DCSA is deposit based. So, each week I'm getting a deduction, writing a check to the daycare and then waiting for my reimbursement so I'm short two ways. I realize it all works out in the end but right now I have 5 weeks of receipts to submit because I'm waiting for the balance in my acct to be enough to cover them.

[DmOrtega]

If the child care you've paid for has been incurred, submit the claims. They will keep them on file and reimburse you as your payroll deductions are given to them.

[tbb113]

Sarah - you can submit the receipts even if you don't have enough to cover them. They will pay you what you have had deducted and then keep sending you money as it is deducted

Day care costs cover summer camp (but not residental camp). It also only covers until the child is 13 (not through 13). So, the year your child turns 13, the costs can only be covered through their birthday. For example, Alex's birthday is July 31. So, last year his day camp was covered for June and July, but not August.

[Sarah428]

With the way our FSA company works if you submit a claim and their isn't enough funds you get the claim sent back saying so and you have to resubmit when your balance is enough to cover it.

I just hold onto them, saves on paperwork :mad:

[tbb113]

What a pain! I would end up losing receipts :o

[RunnerKim]

Sarah - that's a pain! Neither the FSA company my company nor DH's has that policy. If you have an opportunity to provide feedback to your HR or even the FSA company, it might be something that could be changed. It doesn't sound like it's the norm since others have posted as well.

We have way more than $5000/year (our current bill is around $1500/month!) so it doesn't take us long to submit enough receipts to have maxed us out and then we just get the deposits throughout the year. So for us it's actually a lot simpler than all the little tiny receipts for health related stuff.

Kim

[Loremma]

Does anyone know what kind of daycare is covered? Such as you have your mother watch the kids, can that be deducted or does it have to be someone/someplace with a license? TIA.

[DmOrtega]

You will need to supply their tax id # with the claims. Usually this will be printed on a receipt.

[tbb113]

I believe that any daycare can be submitted. But since you need to provide the providers ssn or business equivelent, unless your provider is reporting the income, you might end up with an IRS audit for them.

[Sarah428]

My cousin use to watch Ella and we couldn't use the DCSA because she didn't claim it, as Tyra mentioned it could mean an audit for them.

Sarah - that's a pain! Neither the FSA company my company nor DH's has that policy. If you have an opportunity to provide feedback to your HR or even the FSA company, it might be something that could be changed.
We just had a HR meeting last week and I wasn't the only one complaining so I hope it gets changed. With all the paperwork I've had to do & keep track of I don't know if we'll bother next year.

Katygirl - I'm sure you'll have a much better experience than I :o

[RunnerKim]

And it does have to be daycare for work-related needs. So you can't claim it for a dinner out or if one parent isn't working but want's to have time to run errands, workout etc. Which is probably why residential summer camps aren't covered b/c it includes non-work time.

Kim