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Dependant Care

Dependent Care Reimbursement Account
Many people who work are responsible for children, aging parents or dependent adults. For these employees, quality care for their dependents is a real concern. Erlanger wants to help by offering you a special reimbursement account, which may help you save on taxes for dependent care. So, if you are a single working parent or if you pay dependent day care expenses for an eligible child or adult while you and your spouse work or attend school, the Dependent Care Reimbursement Account may save you money.

This is how you use your account:
You have until April 30 to submit claims for expenses incurred during the prior plan year. Allied Health Benefits will honor the postmark date on your claim envelope. Prior year claims postmarked after April 30 are not eligible for reimbursement. Remember that the cost of a service is incurred when it is received. All expenses are reimbursed based on the date that the service is received, not based on when you are billed or when you pay for the service.

Special Rules for Divorced Parents
Special rules apply if you and your spouse are divorced or legally separated, or if you have lived apart at all times during the last six months of the tax year. A child is considered to be the dependent of the custodial parent (the parent who has custody of the child for the greater portion of the calendar year), provided the child receives over one-half of his or her support from one or both parents and was in the custody of one or both parents for more than one-half of the tax year. The child is the dependent of the custodial parent even if the custodial parent waives the right to claim the child as a dependent on his or her income tax return. In any event, the non-custodial parent cannot be reimbursed for the child’s day care expenses through the Dependent Care Reimbursement Account.

To participate in a Dependent Care Reimbursement Account, you must be a regular employee. You may submit a reimbursement claim for dependent care assistance expenses incurred inside or outside your home, which allow you to be gainfully employed. The maximum amount, which may be reimbursed in a plan year, is $4,992. The following types of individuals are generally qualifying dependents:

  • A dependent who is under age 13 and for whom the taxpayer is entitled to a dependent deduction. 
  • A dependent or spouse of the taxpayer who is physically or mentally incapable of caring for himself or herself, regardless of age. 
  • A child meeting the special dependency test of divorced parents.

Note: Expenses which are incurred for services provided outside your home (e.g., a day care center) qualify only if the center complies with all applicable state and local regulation. Expenses paid to your relative (except your spouse or other dependent) are generally reimbursable.

IRS Limitations
A Dependent Care Reimbursement Account reimburses you for dependent day care expenses you incur in order to allow you (or you and your spouse) to work. You cannot use the Dependent Care Reimbursement Account and the Federal dependent care tax credit for the same expenses. Here are the differences between the two:

  • The Dependent Care Reimbursement Account reduces your taxable income, up to $4,992 per year.
  • The Federal Dependent Care tax credit reduces your Federal income tax by a percentage of your qualifying dependent care expenses. The maximum expense that can be used for the credit is $2,400 for one dependent and $4,800 for two or more dependents.
    The total amount of your Dependent Care election cannot be greater than your income or your spouse’s income, whichever is lower. If your spouse has no income, you cannot use this account, unless he or she is disabled or is a full time student. If you and your spouse both have dependent care accounts, your total combined deposits cannot exceed $5,000.

Reimbursable Expenses
Expenses that can be reimbursed through a Dependent Care Reimbursement Account include:

  • Payments to nursery schools, day care centers, or individuals for care of preschool children
  • Payments for before-school or after-school care for those from first grade until age 13
  • Payments to providers outside the home for care of disabled dependent(s)
  • Services of a housekeeper, maid or cook if services were partly for the care of a child under age 13 or a disabled dependent (includes meals, lodging and payroll taxes of housekeeper)
  • Payments to relatives for care of qualifying dependent(s) (relative cannot be your dependent)
  • Payments (in lieu of regular day care) to summer day camp or other summer program, but not overnight camp

Non-reimbursable Expenses
Expenses not eligible for reimbursement through you Dependent Care Reimbursement Account include:

  • Expenses for education of qualified dependent(s) in kindergarten or higher
  • Expenses for food, clothing, or entertainment for dependent(s)
  • Transportation to get dependent(s) to day care outside your home
  • Payments to a dependent
  • Payments to housekeeper while you are home sick
  • Expenses for overnight or specialty camps
  • Nursing home expenses, unless the dependent spends at least eight (8) hours each day in your household

Planning for a Reimbursement Account
Estimate the amount you will spend on eligible expenses during the coming year. Then, decide how much to contribute into each account. Your contributions to the Dependent Care Reimbursement Account are deducted from your paycheck in equal amounts, divided over 26 pay periods. Money cannot be transferred from the Health Care Reimbursement Account to the Dependent Care Reimbursement Account or from the Dependent Care Reimbursement Account to the Health Care Reimbursement Account. You will want to plan your deposits carefully and conservatively. If you have money left in the account after you have submitted all your claims for the year, you will lose the remaining money according to IRS rules.

Changing Your Election
You may change your reimbursement account election only if you notify Human Resources within 30 days of a qualifying change in family status, which includes:

  • Marriage
  • Divorce
  • Birth of child
  • Death of dependent
  • Change in your employment status
  • Beginning or termination of your spouse’s employment, significant changes in your spouse’s health care plan. (You cannot change your election if you simply decide you can’t afford the deductions or have an unforeseen expense, or your day care facility has a price increase.)

Requesting Reimbursement
You may request to be reimbursed only after a service has been rendered. (For example, you may not pay a dependent day care bill in advance and be immediately paid back from your account.) With your Dependent Care Account, you will be reimbursed as the money accumulates in you account. (You should, however, claim the full amount of the expense you paid.)

Dependent Care Reimbursement Account participants should provide either receipts signed by the provider or photocopies of both sides of a canceled check. You will also need to include the provider’s Social Security number or tax I.D. number.