Vision Payroll

July 29, 2011

Question of the Week: What Is a Qualifying Person for a Dependent Care FSA Reimbursement?

What Is a Qualifying Person for a Dependent Care FSA Reimbursement?
What Is a Qualifying Person for a Dependent Care FSA Reimbursement?
This week’s question comes from Eileen, an office manager. I read that one of the tests for an expense to qualify for reimbursement by a dependent care flexible spending arrangement (FSA) is that the care must be for one or more qualifying persons. What is a qualifying person for a dependent care FSA reimbursement? Answer: A person is a qualifying person if the person meets one of three tests.

Qualifying Person Test

A qualifying person for 2011 is:

  • Your qualifying child who is your dependent and who was under age 13 when the care was provided.
  • Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or
  • A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either:
    • Was your dependent, or
    • Would have been your dependent except that:
      • He or she received gross income of $3,700 or more,
      • He or she filed a joint return, or
      • You, or your spouse if filing jointly, could be claimed as a dependent on someone else’s 2011 return.

Exceptions Apply To General Rules

The rules above are generally applicable, but there are exceptions for certain situations such as children of divorced parents, care in the year or birth or death, adopted children, and other situations.

Contact Vision Payroll Today

Contact Vision Payroll for further information on the qualifying person test for reimbursement by a dependent care FSA.

July 22, 2011

Question of the Week: What Are the Tests for Reimbursement of Expenses by a Dependent Care FSA?

What Are the Tests for Reimbursement of Expenses by a Dependent Care FSA?
What Are the Tests for Reimbursement of Expenses by a Dependent Care FSA?
This week’s question comes from Brent, an HR Director. I read about employees being reimbursed through a dependent care flexible spending arrangement (FSA) for summer camp costs and need more information. What are the tests for reimbursement of expenses by a dependent care FSA? Answer: Plans may have different forms that must be completed to receive reimbursement, but the expenses themselves must be qualifying expenses to be eligible for reimbursement.

Test for Qualifying Expenses

To be eligible for reimbursement under a dependent care FSA, an employee must meet all of the following tests:

  • Qualifying Person: The care must be for one or more qualifying persons.
  • Earned Income: The employee (and spouse, if filing jointly) generally must have earned income during the year.
  • Work-Related Expense: The employee must pay child and dependent care expenses so that the employee (and spouse, if filing jointly) can work or look for work.
  • Care Provider: The employee must make payments to someone the employee (and spouse, if filing jointly) cannot claim as a dependent. If paid to a child of the employee, the child must also be age 19 or older by the end of the year. Payments cannot be made to:
    • The employee’s spouse, or
    • The parent of the employee’s qualifying person if the qualifying person is the employee’s child and under age 13.
  • Filing Status: The employee’s filing status must be single, head of household, qualifying widow or widower with dependent child, or married filing jointly. Married employees must generally file a joint return.
  • Provider Identification: The employee must identify the care provider on the employee’s income tax return.

Contact Vision Payroll Today

Contact Vision Payroll for further information on the tests for reimbursement of expenses by a dependent care FSA.

July 8, 2011

Question of the Week: Can Camp Costs Be Reimbursed Under a Dependent Care FSA?

Can Camp Costs Be Reimbursed Under a Dependent Care FSA?
Can Camp Costs Be Reimbursed Under a Dependent Care FSA?
This week’s question comes from Casey, an HR director. We have a dependent care flexible spending arrangement (FSA) and one of our employees has asked to be reimbursed for camp costs paid for her son. Can camp costs be reimbursed under a dependent care FSA? Answer: Camp costs can be reimbursed under a dependent care FSA in some circumstances.

FSAs Use Pre-Tax Dollars to Pay Qualified Expenses

Employers may set up FSAs (sometimes called flexible spending accounts) that allow employees to elect to contribute a portion of their pay to their FSA account. The amount paid into the FSA can be used to pay qualifying expenses of the employee. Most plans are set up to pay medical or dependent care expenses. The main advantage is that money is contributed to the plan on a pre-tax basis and is not taxed upon withdrawal if used to pay qualifying expenses.

Summer Camp Costs May Qualify for Reimbursement

While the cost of attending overnight camp does not qualify as an allowable expense, the cost of day camp may qualify as an allowable expense. The day camp costs must meet all the other requirements of §129 of the Internal Revenue Code of 1986 to qualify.

Contact Vision Payroll for Further Information

Contact Vision Payroll today for further information on setting up or maintaining a dependent care FSA.

January 17, 2011

2010 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 10, dependent care benefits.

2010 Annual Exclusion Limit Is $5,000

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in box 1 and box 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in box 1 and box 5 and box 3, subject to the wage limitation.

Box 11, Nonqualified Plans Is the Next Topic

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 17, 2010

2009 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 10, dependent care benefits.

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation.

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2009 Form W-2.

January 25, 2009

2008 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 10, dependent care benefits.

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation.

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2008 Form W-2.

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