Dependent Care

shuga_23

MIL is telling me that I need to have all my paperwork to deduct daycare from my 2011 taxes in to HR before tomorrow. Does that sound right?? He isn't starting care until late next month.

Mrs.ErikaMay

I'm sure all Dependent care flexible spending accounts are different at each company, but that doesn't sound entirely right. 

You DO need to have your allocation in to HR before the year starts so that the weekly/ biweekly deductions start taking place and being put in your account to draw from, but that's usually part of your annual benefits enrollment or part of a "change of life" adjustment to your benefits.

For my FSA account, there is no paperwork required until I choose to withdraw something from the account, which I do once a quarter.  Then there is a form I fill out and fax in and then like magic I get a nice check in the mail a week or two later!  My account is handled by a third party vendor, so I don't ever give anything to my HR department.  In fact, they don't have any questions about what or where my dependant care is.  If I decide to put away $5000 and then I can't use it, that's my problem and they probably just take the money back or something  (It's use it or lose it.)

Sounds like MIL isn't entirely up to speed.

kclouts

The date by which your DCRA enrollment forms are due is determined by your employer, but as Erika says, it is usually during your open enrollment period or during a "change of life status" event.  I would check with your employer and not listen to MIL.

MainelyFoolish

What Erika and Kristen said.

Also, FYI, if you're being reimbursed for daycare from a Dependent Care FSA, you can't also take the Dependent Care deduction on your taxes.  It's one or the other. 

Mrs.ErikaMay

MainelyFoolish:

Also, FYI, if you're being reimbursed for daycare from a Dependent Care FSA, you can't also take the Dependent Care deduction on your taxes.  It's one or the other. 

When I did my taxes last year, the documentation in TaxAct Online indicated that I couldn't double up on my deductions, but it did seem to imply that I could figure in the remainder of what I didn't cover through my FSA.  So like I put in $3000 to my FSA, which I cashed out, but daycare in total cost something [absurd] like $8000.  So I used the $5000 on my taxes for the daycare deduction.

Now, I'm no CPA, so maybe I'm just asking for the IRS to come knocking on my door, but it seemed to be correct based on the instructions I read.  Not to be contridictory to you Kimberly...   I could be totally incorrect.

MainelyFoolish

Mrs.ErikaMay:

MainelyFoolish:

Also, FYI, if you're being reimbursed for daycare from a Dependent Care FSA, you can't also take the Dependent Care deduction on your taxes.  It's one or the other. 

When I did my taxes last year, the documentation in TaxAct Online indicated that I couldn't double up on my deductions, but it did seem to imply that I could figure in the remainder of what I didn't cover through my FSA.  So like I put in $3000 to my FSA, which I cashed out, but daycare in total cost something [absurd] like $8000.  So I used the $5000 on my taxes for the daycare deduction.

Now, I'm no CPA, so maybe I'm just asking for the IRS to come knocking on my door, but it seemed to be correct based on the instructions I read.  Not to be contridictory to you Kimberly...   I could be totally incorrect.

It's been a few years since I practiced, but this is how I remember it:

The limit for the dependent care FSA is $5k.  The limit for the dependent care tax credit is $3k per child, up to two children.  The amount of the dependent care tax credit is reduced by the amount of any dependent care benefits that are excluded from your income. 

If you had two kids and paid at least $6k for daycare, you could use the $5k from the FSA and still have an extra $1k to claim toward the dependent care tax credit.  But if you only have one kid, this doesn't come into play.

Just because the tax software asks you to put in the numbers doesn't mean it comes through on the return.  I think if you read through your tax return from last year, you'll find that you didn't claim the dependent care tax credit.

If you'd like to read more, here is the relevant publication:  http://www.irs.gov/pub/irs-pdf/p503.pdf

Mrs.ErikaMay

MainelyFoolish:

[

It's been a few years since I practiced, but this is how I remember it:

...

If you'd like to read more, here is the relevant publication:  http://www.irs.gov/pub/irs-pdf/p503.pdf

Thanks!

meganmarieCA

MainelyFoolish:

Mrs.ErikaMay:

MainelyFoolish:

Also, FYI, if you're being reimbursed for daycare from a Dependent Care FSA, you can't also take the Dependent Care deduction on your taxes.  It's one or the other. 

When I did my taxes last year, the documentation in TaxAct Online indicated that I couldn't double up on my deductions, but it did seem to imply that I could figure in the remainder of what I didn't cover through my FSA.  So like I put in $3000 to my FSA, which I cashed out, but daycare in total cost something [absurd] like $8000.  So I used the $5000 on my taxes for the daycare deduction.

Now, I'm no CPA, so maybe I'm just asking for the IRS to come knocking on my door, but it seemed to be correct based on the instructions I read.  Not to be contridictory to you Kimberly...   I could be totally incorrect.

It's been a few years since I practiced, but this is how I remember it:

The limit for the dependent care FSA is $5k.  The limit for the dependent care tax credit is $3k per child, up to two children.  The amount of the dependent care tax credit is reduced by the amount of any dependent care benefits that are excluded from your income. 

If you had two kids and paid at least $6k for daycare, you could use the $5k from the FSA and still have an extra $1k to claim toward the dependent care tax credit.  But if you only have one kid, this doesn't come into play.

Just because the tax software asks you to put in the numbers doesn't mean it comes through on the return.  I think if you read through your tax return from last year, you'll find that you didn't claim the dependent care tax credit.

If you'd like to read more, here is the relevant publication:  http://www.irs.gov/pub/irs-pdf/p503.pdf

You are very handy to have around.  

KatieLG04

I believe I can only make changes within 30 days of qualifying event or open enrollment.  I started doing the DSA last year and it's nice when I submit my claims every 6 months and get a nice check.  I'm trying to figure out how to best use it, like maybe treat it as a savings account and when the money comes put it in my retirement account.  It is so hard to put money aside for that, so when I get the checks it feels like unexpected money and I want to make it worthwhile and not blow it.