Dependent care FSA

[Anonymous]

Anonymous wrote: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.

This is not true unless you only use childcare at the end of the calendar year, since you can get reimbursed only after you've withheld the money and also spent that much on childcare.

I use daycare year round and submit receipts monthly. About $200 is withheld per pay period. This $200 is paid out to me in about a week. Not much of a wait.

If you want to save this you can have this money deposited straight in a separate savings account. No need to let someone else hold into your money interest free all year.

[Anonymous]

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

well, $5k doesn't just go poof. somebody's freeloading that money somewhere. and it's criminal.

[Anonymous]

It's not criminal. If you're too lazy to submit your claim in the time allotted (many times well into the following year), you should lose the $. It's not that hard.

[Anonymous]

It's really not too bad. I did it for over a year and worried about affording childcare with the money also being taken out of my paychecks but it caught up quickly. I did my claims every two weeks for the amount that had been taken out (was in the FSA) to help pay off set the cost of childcare (although if I could have afforded it saving the entire 5k sounds like a great idea). Claims submission was online and easy, although you have to scan in a signed form/receipt.

[Anonymous]

Wow! You guys are brilliant! I submit claims quarterly and never thought to put into the kids' 529's. Thanks!!!

[Anonymous]

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?

No. It sounds like you make too much to qualify for the dependent care CREDIT, which is a different thing.

The Dependent Care FSA is a workplace benefit. Does your employer offer one? It's a tax EXCLUSION, not a credit.

[Anonymous]

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!

That is genius. I may steal this.

[Anonymous]

Anonymous wrote:Does anyone use an FSA account (pre-tax) for dependent care? My employer offers this option and it seems like a good deal except that it also seems like you are essentially paying for day care out of pocket, while also putting that $$ into an FSA that you then will have to reimbursed for, so in the end it evens out that you pay for care services pre-tax but in the day to day it seems like you have to budget that daycare $ will come basically two times a month "upfront" payment to provider and then in your FSA account before you get it reimbursed into your regular bank account.

Does this make any sense? My head is spinning a little with all the eminent changes!

Yes until you get reimbursed.

[Anonymous]

Anonymous wrote:

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.

You can get a deduction for over 4k in VA, you just have to put it in different investments or have your spouse open an account as the account owner. The below language is from VA Tax ruling 10-240 (emphasis added):

"The Virginia college savings plan provides that each investment by the same account owner establishes a separate VEST account if the account owner, beneficiary OR portfolio is different."


So if you have 1 kid and invest 4k in the 100% stock portfolio and another 4k in the international stock portfolio you could take the the deduction on all 8k. Your spouse would count as a separate account holder, so any portfolios they contribute to would also be separate. The deduction in VA is nearly unlimited, you just need to spread it around the investment choices.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

You can get a deduction for over 4k in VA, you just have to put it in different investments or have your spouse open an account as the account owner. The below language is from VA Tax ruling 10-240 (emphasis added):

"The Virginia college savings plan provides that each investment by the same account owner establishes a separate VEST account if the account owner, beneficiary OR portfolio is different."


So if you have 1 kid and invest 4k in the 100% stock portfolio and another 4k in the international stock portfolio you could take the the deduction on all 8k. Your spouse would count as a separate account holder, so any portfolios they contribute to would also be separate. The deduction in VA is nearly unlimited, you just need to spread it around the investment choices.

I'm not sure your reading of that ruling is correct, or if it is, it only applies to VEST accounts. See Transaction 4: http://www.policylibrary.tax.virginia.gov/OTP/Policy.nsf/803d7a64c617f9f8852569520038e932/57d51cfae034f1e4852577b300680491?OpenDocument

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

You can get a deduction for over 4k in VA, you just have to put it in different investments or have your spouse open an account as the account owner. The below language is from VA Tax ruling 10-240 (emphasis added):

"The Virginia college savings plan provides that each investment by the same account owner establishes a separate VEST account if the account owner, beneficiary OR portfolio is different."


So if you have 1 kid and invest 4k in the 100% stock portfolio and another 4k in the international stock portfolio you could take the the deduction on all 8k. Your spouse would count as a separate account holder, so any portfolios they contribute to would also be separate. The deduction in VA is nearly unlimited, you just need to spread it around the investment choices.

I'm not sure your reading of that ruling is correct, or if it is, it only applies to VEST accounts. See Transaction 4: http://www.policylibrary.tax.virginia.gov/OTP/Policy.nsf/803d7a64c617f9f8852569520038e932/57d51cfae034f1e4852577b300680491?OpenDocument

VA has three options - VEST (individuals invest in any of a set of investment options straight from va529.com), prepaid (buy a semester at a time with pricing based on age), and collegewealth/collegeamerica (investments through brokers). The flexibility applies to VEST accounts, as the language I quoted clearly states, not to College America (which has to be done through a broker), or prepaid (where you can't get a tier 1 semester for 4-5k). The ruling is pretty clear.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

You can get a deduction for over 4k in VA, you just have to put it in different investments or have your spouse open an account as the account owner. The below language is from VA Tax ruling 10-240 (emphasis added):

"The Virginia college savings plan provides that each investment by the same account owner establishes a separate VEST account if the account owner, beneficiary OR portfolio is different."


So if you have 1 kid and invest 4k in the 100% stock portfolio and another 4k in the international stock portfolio you could take the the deduction on all 8k. Your spouse would count as a separate account holder, so any portfolios they contribute to would also be separate. The deduction in VA is nearly unlimited, you just need to spread it around the investment choices.

I'm not sure your reading of that ruling is correct, or if it is, it only applies to VEST accounts. See Transaction 4: http://www.policylibrary.tax.virginia.gov/OTP/Policy.nsf/803d7a64c617f9f8852569520038e932/57d51cfae034f1e4852577b300680491?OpenDocument

VA has three options - VEST (individuals invest in any of a set of investment options straight from va529.com), prepaid (buy a semester at a time with pricing based on age), and collegewealth/collegeamerica (investments through brokers). The flexibility applies to VEST accounts, as the language I quoted clearly states, not to College America (which has to be done through a broker), or prepaid (where you can't get a tier 1 semester for 4-5k). The ruling is pretty clear.

Not to hijack, but years ago I opened with College America and I'm a bit annoyed that I did given the load (which pretty much canceled out the tax benefit). That said, the fees on the back end are good and the ROI has been decent.

I VEST a better way to go? I've considered rolling over.

Also considered prepaid, but fairly certain one kid is going to end up going out of state since she's interested in marine biology (no good programs for that in Virginia so far as I can tell).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

You can get a deduction for over 4k in VA, you just have to put it in different investments or have your spouse open an account as the account owner. The below language is from VA Tax ruling 10-240 (emphasis added):

"The Virginia college savings plan provides that each investment by the same account owner establishes a separate VEST account if the account owner, beneficiary OR portfolio is different."


So if you have 1 kid and invest 4k in the 100% stock portfolio and another 4k in the international stock portfolio you could take the the deduction on all 8k. Your spouse would count as a separate account holder, so any portfolios they contribute to would also be separate. The deduction in VA is nearly unlimited, you just need to spread it around the investment choices.

I'm not sure your reading of that ruling is correct, or if it is, it only applies to VEST accounts. See Transaction 4: http://www.policylibrary.tax.virginia.gov/OTP/Policy.nsf/803d7a64c617f9f8852569520038e932/57d51cfae034f1e4852577b300680491?OpenDocument

VA has three options - VEST (individuals invest in any of a set of investment options straight from va529.com), prepaid (buy a semester at a time with pricing based on age), and collegewealth/collegeamerica (investments through brokers). The flexibility applies to VEST accounts, as the language I quoted clearly states, not to College America (which has to be done through a broker), or prepaid (where you can't get a tier 1 semester for 4-5k). The ruling is pretty clear.

Not to hijack, but years ago I opened with College America and I'm a bit annoyed that I did given the load (which pretty much canceled out the tax benefit). That said, the fees on the back end are good and the ROI has been decent.

I VEST a better way to go? I've considered rolling over.

Also considered prepaid, but fairly certain one kid is going to end up going out of state since she's interested in marine biology (no good programs for that in Virginia so far as I can tell).

There are some vanguard options with pretty low loads in the in VEST offerings (.24%-.79%), which range from vanguard indexes to age based funds. Basically VA charges a .20% administration fee on top of the fund management fee. So the vanguard total stock index has a mgmt fee of 0.04, plus the administrator. Fee for a total of 0.24%.

Prepaid makes me nervous, as for out of state they promise the LESSER of what you paid in plus a "reasonable rate of return" OR the average VA public tuition. The "reasonable" return is tied to money funds index and has been basically zero (0.02%-0.07%) for the past few years, so I am taking my chances with inVEST.

William and Mary has a marine bio program (VIMS), but I dont know how they stack up.

[Anonymous]

Anonymous wrote:It's not criminal. If you're too lazy to submit your claim in the time allotted (many times well into the following year), you should lose the $. It's not that hard.

last time i checked taking someone else's money is called stealing which is criminal

[Anonymous]

Anonymous wrote:

Anonymous wrote:It's not criminal. If you're too lazy to submit your claim in the time allotted (many times well into the following year), you should lose the $. It's not that hard.

last time i checked taking someone else's money is called stealing which is criminal

Well, someone needs to report the IRS and every state tax agency. If you don't file your tax return within a certain time frame (3 years in the district I believe), you lose out on any refund you may have been entitled to receive.