Discrimination test for dependent care FSA?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It is unfortunate but normal audit that should happen ever year. It happens if the % of lower income folks contributiing is significantly less than high income folks contributing. The plan is discriminating in favor of highly comped folks. The same thing can happen with 401ks, but 401ks have the option of a safe harbor so you don't hear about it as much.

Your husband will most likely be affected by this every year going forward. If you make less than 115k and have access to a dependent care FSA, you should contribute for the family.

Happened to us in the 401k situation. Every year there is an audit and we get told how much can be put in.

That really stinks. I think the law is ridiculous. There is no safety net for most of us. We are on our own for retirement and should be always allowed to contribute the max.

You do understands that nothing stops you from still saving the money. I will never understand that concept of "I can't save for retirement if it isn't tax deferred..."

Please tell me where I said you could not continue to save? And where did I say "I Can't save for retirement if it isn't tax deferred..."?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It is unfortunate but normal audit that should happen ever year. It happens if the % of lower income folks contributiing is significantly less than high income folks contributing. The plan is discriminating in favor of highly comped folks. The same thing can happen with 401ks, but 401ks have the option of a safe harbor so you don't hear about it as much.

Your husband will most likely be affected by this every year going forward. If you make less than 115k and have access to a dependent care FSA, you should contribute for the family.

Happened to us in the 401k situation. Every year there is an audit and we get told how much can be put in.

That really stinks. I think the law is ridiculous. There is no safety net for most of us. We are on our own for retirement and should be always allowed to contribute the max.

You do understands that nothing stops you from still saving the money. I will never understand that concept of "I can't save for retirement if it isn't tax deferred..."

You do realize that this thread is about childcare costs not retirement don't you? They need to spend the money either way. I will never understand that concept of criticizing without reading what the topic is.

[Anonymous]

I will never understand why someone making 115+ would get a tax credit to raise children.

[Anonymous]

Anonymous wrote:I will never understand why someone making 115+ would get a tax credit to raise children.

It's just part of the compensation package. I'd be perfectly happy getting 2K as bonus to income instead.

[Anonymous]

Anonymous wrote:I will never understand why someone making 115+ would get a tax credit to raise children.

It's not a credit, it's a deduction.

[Anonymous]

The added insult to all of this is that both the Child Tax Credit and the Dependent Care Credit are phased out completely after a certain MAGI (the actual number is escaping me right now). So, you don't get to use the pre-tax FSA and you don't get the tax credits.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I will never understand why someone making 115+ would get a tax credit to raise children.

It's not a credit, it's a deduction.

Which is still an entitlement/subsidy via tax savings to YOU that the public bears to help you raise your children.

[Anonymous]

Anonymous wrote:The added insult to all of this is that both the Child Tax Credit and the Dependent Care Credit are phased out completely after a certain MAGI (the actual number is escaping me right now). So, you don't get to use the pre-tax FSA and you don't get the tax credits.

I just did my taxes last weekend. Didn't qualify for the Child Tax Credit, the Dependent Care Credit, the Student Loan Interest Deduction, or the Mortgage Insurance Interest Deduction.

A lot of the tax credits and deductions totally screw over people who live in high cost of living areas. It makes me so angry.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will never understand why someone making 115+ would get a tax credit to raise children.

It's not a credit, it's a deduction.

Which is still an entitlement/subsidy via tax savings to YOU that the public bears to help you raise your children.

You take zero deductions? You don't even claim yourself?

[Anonymous]

Anonymous wrote:

Anonymous wrote:FSA isn't a tax deferral, it's a way to pay for dependent care with "pre-tax" dollars. I've never heard of a company saying that an employee can't do this because of income limits.

How is this legal? Isn't it a federal program?

It is a part of the law. High income earners cannot be overrepresented in the plan so that it skews only for one group.

I don't understand this. If the high earners want to use the program more, who cares?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:FSA isn't a tax deferral, it's a way to pay for dependent care with "pre-tax" dollars. I've never heard of a company saying that an employee can't do this because of income limits.

How is this legal? Isn't it a federal program?

It is a part of the law. High income earners cannot be overrepresented in the plan so that it skews only for one group.

I don't understand this. If the high earners want to use the program more, who cares?

I agree. I don't get this at all. And why is it company-by-company? If they don't want people earning $115K or higher to use it, why isn't that limit simply built into the tax law?