Dependent FSA Enrolled, but no Job

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Subject Author Date Dependent FSA Enrolled, but no Job RajT 07-28-2009  Re: Dependent FSA Enrolled, but no Job Alan 07-28-2009  Re: Dependent FSA Enrolled, but no Job Mark Bole 07-28-2009  Re: Dependent FSA Enrolled, but no Job Brew1 07-28-2009
Posted by RajT on July 28, 2009, 2:07 pm Please log in for more thread options Hi I have a job and been deducting money ($1000 for the year) into my employer sponsored dependent FSA. But my wife does not have a job and does not have earned income so far this year. I enrolled into dependent FSA after I read somewhere that "Activelly Looking for a job" makes one eligible for Dependent case benefits. My wife has been actively looking for a job with out much success so far. Her chances of landing a job before the end of the year is bleak. She has decided to get back to school now (not full time). I am really confused about if I am eligible to get reimbursed for dependent care expenses from my FSA account. My question is, Can I get this money reimbursed (for my child's day care expenses) and later pay taxes on this when I files taxes ()assuming I am not eligible? Thanks Raj ------------------------------------- ##-----------------------------------------------## Newsgroup Access Courtesy http://www.rockryno.com/ Tax and Accounting Software Forums Web and RSS access to your favorite newsgroup - misc.taxes.moderated - 22436 messages and counting! ##-----------------------------------------------## -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Alan on July 28, 2009, 2:55 pm Please log in for more thread options RajT wrote: > Hi > > I have a job and been deducting money ($1000 for the year) into my > employer sponsored dependent FSA. But my wife does not have a job and does > not have earned income so far this year. I enrolled into dependent FSA > after I read somewhere that "Activelly Looking for a job" makes one > eligible for Dependent case benefits. My wife has been actively looking > for a job with out much success so far. Her chances of landing a job > before the end of the year is bleak. She has decided to get back to school > now (not full time). > > I am really confused about if I am eligible to get reimbursed for > dependent care expenses from my FSA account. My question is, Can I get > this money reimbursed (for my child's day care expenses) and later pay > taxes on this when I files taxes ()assuming I am not eligible? > > Thanks > > Raj > > ------------------------------------- > > > > > ##-----------------------------------------------## > Newsgroup Access Courtesy http://www.rockryno.com/ > Tax and Accounting Software Forums > Web and RSS access to your favorite newsgroup - > misc.taxes.moderated - 22436 messages and counting! > ##-----------------------------------------------## > Assuming that the plan you have been contributing into is a Dependent Care Assistance Plan (DCAP), then you must look to the plan document to see if the day care expenses for your child are reimbursable. You must look to tax law to see if any reimbursement is tax-free. Based on the facts you present (your spouse will not have any earned income; nor is she nor will she be a full time student and therefore have deemed earned income) and assuming she is not mentally or physically disabled such that she can not care for herself, then you would not be entitled to any tax-free benefits. The rule you reference regarding "actively looking for a job", requires that the spouse have at least some earned income for the year in order for you to have qualified dependent care expense. If she were a full time student, she would have deemed earned income of $200 for every month she was a full time student. As such, if you receive reimbursement from the plan for your child's day care expense, you would have to complete Part III of Form 2441 to calculate the taxable amount. In your case, the taxable amount would be the amount reimbursed. You enter this amount on Line 7 of your 1040 and make a notation on that line that says "DCB." All commercially available income tax software can do this for you. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on July 28, 2009, 4:47 pm Please log in for more thread options Alan wrote: >> I am really confused about if I am eligible to get reimbursed for >> dependent care expenses from my FSA account. My question is, Can I get >> this money reimbursed (for my child's day care expenses) and later pay >> taxes on this when I files taxes ()assuming I am not eligible? > Assuming that the plan you have been contributing into is a Dependent > Care Assistance Plan (DCAP), then you must look to the plan document to > see if the day care expenses for your child are reimbursable. I'd wager it is reimbursable--is it actually possible for the employer to set up a plan where they can keep the money even if legitimate expenses are submitted timely? Surely they would be required to tell the employee at sign-up time about this.... > The rule you reference regarding "actively looking for a job", requires > that the spouse have at least some earned income for the year in order > for you to have qualified dependent care expense. If she were a full > time student, she would have deemed earned income of $200 for every > month she was a full time student. Make that $250/month with one child, $500 for two. The amounts are designed to come out at $3K and $6K annually, the maximum qualifying expenses if the credit is being claimed with one or two-plus dependents, respectively. As Alan said, if you don't meet the requirements for tax-free employer reimbursement, then the amount (box 10 of your W-2) gets added back into taxable income for the year. It's almost as if you hadn't set up deductions with your employer, except for three things: 1) the expense/hassle of filling out an extra tax form, 2) your employer won't do withholding to cover the tax on this amount, 3) you'll be avoiding social security (if you're not over the annual maximum) and medicare tax on the deductions, which could be good or bad depending on your point of view. -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Brew1 on July 28, 2009, 4:53 pm Please log in for more thread options without earned income, the time your spouse was unable to care for your dependent(s) because she was looking for work is moot (see Pub. 503). Distributions from an FSA must be for "qualified medical expenses" to be tax-free. If you receive dependent care benefits, those benefits would become taxable to you if your wife had: no earned income, was not a full-time student, and isn't disabled. But it's a good question. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Which states can Enrolled Agents represent taxpayers in administrative appeals (post-audit level) ? December 7, 2008, 6:09 pm How to add dependent ? 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