General Question

syz's avatar

Anyone familiar with Dependent Care Reimbursement Accounts?

Asked by syz (35636points) November 3rd, 2008

I’ve been told by our benefits guy that I can set it up two ways- the traditional withold pre-tax and have the employee bring me the child care bill that I pay, or (my preference) withold pretax, designate as child care, and then pay to the employee who then pays his own child care bill. I would prefer to not have to do the paperwork and record keeping of paying his bills, but my payroll service is not familiar with option two. The last thing I want to do is get us into trouble with the IRS, so I want to make sure it’s copacetic.

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2 Answers

waterbearer's avatar

The way our program works, at the beginning of the fiscal year we designate how much we want withheld from our paychecks each pay period and it goes into our DCAP account. We then have a form that the caregiver signs each week (or month, however often you want to submit a form) AFTER we pay them. Submit the forms, get reimbursed from the account up to the total that you have designated withheld for that year. I didn’t really like having the money taken out, and then paying, and waiting for reimbursement, but it was a nice tax benefit and it was really pretty easy. The caregiver must pay taxes on their income, though, for it to be legal, since they have to provide their tax number on the form.

gimmedat's avatar

This is such a nice benefit! My company has a seperate firm handle all flex accounts and it’s done just like waterbearer explained. Totally worth it no matter which way you do it. Might you also consider a medical savings plan? It’s a similar pre-tax program for medical expenses. The cool thing about this is that one can use a debit card to cover medical charges and can submit bills that have yet to be paid. I love it! You need not have the money in your account before using it, which means that major medical purchases may be taken care of all at once. I dig all the benefits of the program!

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