Q. My enrollment
material says my dependent daycare
expenses must be “work-related”.
What exactly does the term “work-related”
mean?
The expenses must be incurred to enable
you (and your spouse if married) to
be gainfully employed. Gainful employment
does not include unpaid volunteer
work, or volunteer work for a nominal
salary. Also, you cannot include expenses
you pay for dependent care while you
are off work because of illness (See
IRS Publication 503.)
Q. My child
just started kindergarten for which
I pay tuition. Is this an eligible
dependent care expense?
Yes. You can claim expenses for before
or after school care, or nursery school
and kindergarten expenses provided
the care is custodial in nature and
not educational.
Q. I do volunteer
work and take my two small children
to daycare while I work. Is this an
eligible expense?
No. The expense must be incurred to
enable you to be gainfully employed.
Gainful employment does not include
unpaid volunteer work, or volunteer
work for a nominal salary (See IRS
Publication 503.)
Q. I just had
a new baby and I will be home for
six weeks. I’m taking my 3-year-old
to daycare during this time. Is this
an eligible expense?
No. IRS regulations state that the
expenses incurred must be work-related.
The amounts paid while you are off
work because of illness are not eligible.
Q. I pay my
neighbor to watch my 13-year-old after
school. Is this an eligible expense?
No. The individual being cared for
must meet the “qualifying person
test” as prescribed by the IRS.
A qualifying person includes your
dependent who was under age 13 when
the care was provided and for whom
you can claim an exemption (See IRS
Publication 503.)
Q. My 16-year-old
daughter cares for my 8-year-old son
after school. Can I pay my daughter
and file those expenses through my
flex plan?
No. You can count work-related payments
you make to relatives only if they
are not your dependents.
Q. If I participate
in the dependent care Flexible Spending
Account plan, do I need to report
anything on my personal income tax
return at the end of the year?
Yes. You must identify all persons
or organizations that provide care
for your child or dependent by filing
IRS Form 2441 – Child and Dependent
Care Expenses, along with Form 1040
each year (or Schedule 2 for Form
1040A). Consult your tax advisor if
you have specific questions.
Q. I signed
up to contribute $400 per month into
my dependent care Flexible Spending
Account plan. My actual expenses are
closer to $500 per month. Should I
submit my claim form for $400 or for
$500?
You should file your claim for the
actual amount of charges, $500 in
this case. You will be paid up to
the amount of money in your account
(less prior reimbursements), not to
exceed $400. The other $100 would
be pended and paid once you have additional
funds contributed to your account.
Q. Can I file
dependent care claims at the beginning
of the month for that month?
You can file claims only after the
service has been provided, regardless
of when you pay for the service. It
is recommended that you file claims
after the services have been provided,
in this case at the end of the month.
Claims filed prior to the date of
service will be denied.
Q. If I terminate
employment, can I still file claims?
Yes, you can file claims for expenses
for qualifying work-related expenses
through the run-out period. Expenses
can be incurred before or after your
employment termination date, but prior
to the end of the plan year.
