Dependent care FSA

[Anonymous]

Anonymous wrote:

Anonymous wrote:Turbotax told me that my DH and I make too much money to qualify for the dependent care deduction. Does this sound right?

I wasn't aware there was an income limit. It's the same as a medical FSA.

Dependent care deduction and FSA are different (I believe). FSA is not income based.

My last employer would contribute $500, so I only had to add in $4500. Too bad they were acquired by a larger corp.

[Anonymous]

Anonymous wrote:16:02 - The dependent care deduction is not the same thing as a dependent care FSA. You can earn too much to qualify for the deduction but I don't think there are any income limits on the FSA (if there were, we shoudln't be able to use it but no one -- including our tax accountant -- has ever blinkied about it).

This.

[Anonymous]

Anonymous wrote:Yes, that is essentially what happens. But the impact on your week-to-week budget is much smaller, because you are having the $5,000 taken out over the course of the entire year. So $192 taken out pre-tax for a bi-weekly paycheck, but when you apply for the reimbursement, you will get the full amount. So you would be "out" the money for the first paycheck, but after that you can apply for reimbursement right away.

OP here, yes- this is so much simpler than I am making it in my head.

I think we might be best off just front loading the 5K so that my entire paycheck goes into the FSA until I hit 5K in salary and doing reimbursement over the course of just 4 months of claims instead of at the end of the year.

My employer said that they do theirs based on the FY calendar (july- june) and not regular calendar year, which kind of makes things a little trickier I think for tax purposes, no?

[Anonymous]

Anonymous wrote:Not that complicated. It basically means that you get to pay for some daycare with pre-tax dollars, so you save in taxes. You can frontload your FSA account so that you have a larger amount withheld from your paycheck and can get the full amount reimbursed sooner. And I only ever submitted a single claim for payment.

Not OP, but I just asked our benefits dept. about front-loading (i.e., getting higher amounts taken out of paychecks in the beginning of the year) because I'm a temp employee subject to dismissal at any time. The benefits dept. said that would violate the IRS's "use as you accrue" rule. Did anyone else have this issue?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Not that complicated. It basically means that you get to pay for some daycare with pre-tax dollars, so you save in taxes. You can frontload your FSA account so that you have a larger amount withheld from your paycheck and can get the full amount reimbursed sooner. And I only ever submitted a single claim for payment.

Not OP, but I just asked our benefits dept. about front-loading (i.e., getting higher amounts taken out of paychecks in the beginning of the year) because I'm a temp employee subject to dismissal at any time. The benefits dept. said that would violate the IRS's "use as you accrue" rule. Did anyone else have this issue?

Nope. Unlike the health care FSA (where you can get reimbursed up to the amount of your election even if the money hasn't been paid over yet) the dependent care FSA will only reimburse you up to the amount that's actually been paid over. Which is why people who front-load their deposits so that they can get reimbursed more quickly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I like to wait until the end of the year to submit my reimbursement claim . . . and then I immediately sock the 5K into my daughter's 529 account. Forced savings!

+1

+2, though I only put $4k of it in the 529 since that's the max VA tax benefit per account.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Not that complicated. It basically means that you get to pay for some daycare with pre-tax dollars, so you save in taxes. You can frontload your FSA account so that you have a larger amount withheld from your paycheck and can get the full amount reimbursed sooner. And I only ever submitted a single claim for payment.

Not OP, but I just asked our benefits dept. about front-loading (i.e., getting higher amounts taken out of paychecks in the beginning of the year) because I'm a temp employee subject to dismissal at any time. The benefits dept. said that would violate the IRS's "use as you accrue" rule. Did anyone else have this issue?

Nope. Unlike the health care FSA (where you can get reimbursed up to the amount of your election even if the money hasn't been paid over yet) the dependent care FSA will only reimburse you up to the amount that's actually been paid over. Which is why people who front-load their deposits so that they can get reimbursed more quickly. [/quot

I guess it is the way our plan is set up? They won't let me front-load my deposits. Stinks because I'll use up that $5,000 in a few months!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Not that complicated. It basically means that you get to pay for some daycare with pre-tax dollars, so you save in taxes. You can frontload your FSA account so that you have a larger amount withheld from your paycheck and can get the full amount reimbursed sooner. And I only ever submitted a single claim for payment.

Not OP, but I just asked our benefits dept. about front-loading (i.e., getting higher amounts taken out of paychecks in the beginning of the year) because I'm a temp employee subject to dismissal at any time. The benefits dept. said that would violate the IRS's "use as you accrue" rule. Did anyone else have this issue?

Nope. Unlike the health care FSA (where you can get reimbursed up to the amount of your election even if the money hasn't been paid over yet) the dependent care FSA will only reimburse you up to the amount that's actually been paid over. Which is why people who front-load their deposits so that they can get reimbursed more quickly. [/quot

Sorry, posting error.

I guess it is the way our plan is set up? They won't let me front-load my deposits. Stinks because I'll use up that $5,000 in a few months!

[Anonymous]

but what happens if you missed the claim deadline? what happens to that $5k?

[Anonymous]

You're right that you end up reducing your short term liquidity to save on 5k worth of tax-free childcare dollars later in the year. But presuambly your childcare costs more than 5k, so it's not like you're putting away double at a time.

Like others have mentioned, I like to wait til a big amount accumulates in the FSA and transfer it over in a big chunk to one of our savings accounts.

[Anonymous]

Anonymous wrote:but what happens if you missed the claim deadline? what happens to that $5k?

You lose the money.

[Anonymous]

If you miss the claim deadline, the money is gone. Poof! Don't miss the deadline!

[Anonymous]

I could submit claims whenever, but the account would only pay out once the money was there. I submit the receipts for the first five months. That takes up the whole account. The rest of the year I get an automatic direct deposit (about 2 days after each pay period).

[Anonymous]

Anonymous wrote:If you miss the claim deadline, the money is gone. Poof! Don't miss the deadline!

But the deadline is well into the next year, and you can file for reimbursement as you pay for daycare, not as the money gets pulled from your paycheck.

I know I will hit $5000 in daycare expenses by May, so I file then, and then I just get reimbursed in ~$200 increments every other week for the rest of the year.

[Anonymous]

Anonymous wrote:I could submit claims whenever, but the account would only pay out once the money was there. I submit the receipts for the first five months. That takes up the whole account. The rest of the year I get an automatic direct deposit (about 2 days after each pay period).

Exactly what we do. Pays out over the year.