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| Dependent
Care Reimbursement Plan Frequently Asked Questions |
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are the most commonly asked questions regarding the Dependent Care Reimbursement Plan: |
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What
is the Dependent Care Reimbursement Plan (DCRP)?
This benefit works much like the HCRP but it is designed to
enable you to pay for dependent day care services on a
pre-tax basis.
There is a
child care tax credit available to the employee at the end
of the year, so it is important to compare the tax credit
versus the Dependent Care Reimbursement Plan to determine
which option is better for you.
Each time
dependent day care services are paid, obtain a receipt with
the dates of services, cost of services, the name of the
dependent(s), and the provider of services. Send a copy of
this receipt to Flex Corp along with a completed request for
reimbursement form. Flex Corp will process the receipts and
send you a reimbursement check.
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Is there a
minimum or maximum I may contribute?
You may contribute as little as you feel is necessary to cover
your qualified dependent care expenses, but no more than
$5,000 per year. |
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If
my spouse participates in a DCRP through his employer, can
we each contribute $5,000 per year to the plan?
No. The Internal Revenue Service has indicated that $5,000
per year is the maximum amount for a couple who files
jointly for tax purposes. For a couple who files separately,
$2,500 (per filer) is the annual maximum.
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If I
participate in the DCRP, can I still use the dependent care
tax credit?
Yes you can, but not with the same dollars. For example,
let's say you have two qualifying children (under age 13)
and you normally incur $6,000 per year in dependent care
expenses. You have elected to use the DCRP to reimburse
yourself for $3,000 of those expenses. The tax credit
applies to the first $6,000 of eligible expenses for two
qualifying dependents. To use the tax credit, you must first
subtract the DCRP disbursements ($3,000) from the maximum
allowable under the tax credit ($6,000). The result in this
example, $3,000, is the most on which you can claim the tax
credit. Another example is if you have one qualifying child
(under age 13) and you normally incur $4,000 per year in
dependent care expenses. You have elected to use the DCRP to
reimburse yourself for $3,000 of those expenses. The tax
credit applies to the first $3,000 of the eligible expenses
for one qualifying dependent. To use the tax credit, you
must first subtract the DCRP disbursements ($3,000) from the
maximum allowable under the tax credit ($3,000). The result
,in this example, is negative, and you have no available
dollars upon which to claim the tax credit.
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Who
is an eligible day care provider?
Anyone who is not your dependent under the age of nineteen,
or anyone for whom you do not claim an exemption for tax
purposes. This can be any day care facility, or any
individual whether the individual cares for your child
inside or outside of your home. However, if an individual
cares for your child outside of your home, you will want to
check your state's guidelines for what constitutes a
"qualified" day care facility.
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What of
expenses qualify as eligible dependent care expenses?
These are expenses you incur for dependent care because you
and your spouse are employed. They can be for children under
the age of thirteen (13), for disabled children, or for
adult care. To qualify, you must be able to claim the
dependent for tax purposes and be actively working.
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What types
of expenses do not qualify as eligible dependent care
expenses?
Such things as transportation to and from school, meals and
snacks, classes such as swimming, dancing, or art, and
activity fees are not eligible for reimbursement under the
DCRP.
Also, it is
important to remember that the expenses must have been
incurred to enable you and your spouse (if applicable) to
remain gainfully employed.
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What
does gainfully employed mean?
It means that the income of the lower paid spouse must be at
least equal to the dependent care expenses you incur.
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If my
spouse is a full-time student, but not employed, can I still
participate in the DCRP?
Yes. If your spouse is a full-time student or disabled, your
spouse will be considered to have "income" of $250
per month if there is one qualifying dependent, or $500 per
month if there are two or more qualifying dependents. You
may participate in the DCRP at the applicable level based on
your spouse's "income" and the number of
qualifying dependents (e.g. one qualifying dependent allows
you to elect up to $3,000 per year; two or more qualifying
dependents allows you to elect up to $5,000 per year).
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What
happens to my money if I quit before I use it all?
If you still have dollars in your DCRP when you terminate
employment you may continue to submit eligible dependent
care expenses you incur through the end of the Plan Year.
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What
happens if I don't use all of my money?
Unused dollars are forfeited to the employer. They cannot be
carried forward to a new plan year, and they cannot be
transferred to another cafeteria plan account. They cannot
be returned to the employee as taxable income. You should be
conservative in your estimates.
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What
happens if I have eligible dependent care expenses, but
there is not enough money in my account to cover it?
You will be reimbursed your current account balance. The
additional charges will be "held" until such time
as additional funds are received, at which time you will
automatically be sent the balance. There is no need to
resubmit the expense.
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Can I
have the payments sent directly to my day care provider?
Yes. The third party administrator will request that you
complete a
day
care authorization form
to have payments made
directly to the day care provider. In order to do this,
invoices must be sent no more frequently than monthly from
the provider to the third party administrator. A copy of the
payment will be sent to you for your records.
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