If your employer gives you the option of setting money aside in a dependent care flexible savings account, it’s worth taking a closer look to see how it could save your family money.
Here’s a quick overview to help you decide if such an account is right for you!
What Is A Dependent Care FSA?
It’s a pre-tax benefit account that is used to pay for eligible dependent care services such as preschool, before and after school programs, day camps, as well as child or adult daycare.
Money is deducted from your paycheck and you withdraw it to pay for care of those who depend on you.
For child care, this money can be used for the care of those 13 years old and younger.
Expenses typically not covered include activity fees, field trips, diapers, tutoring and meals.
And tuition for kindergarten or private schools is not a qualifying expense either. That’s because the IRS says that is an educational expense, rather than a child care expense.
What Paperwork Do I Need to Submit?
Keep your receipts! Keep your receipts! Keep your receipts!
You’ll typically be asked to attach an itemized receipt each time you make a withdrawal from your account. Information that is required includes the tax ID of your daycare, the tuition amount, the names of your children and dates the care was provided.
You’ll most likely be asked to submit this information online for reimbursement.
Credit card receipts, canceled checks and balance forward statements won’t cut it for acceptable documentation.
How Much Can I Contribute?
For 2022, the maximum amount that can be contributed to a dependent care account is $5,000.
With dependent care accounts, there traditionally has been no grace period or carry-over option, according to a New York Times article.
But under a temporary pandemic relief change, money in dependent care accounts can be rolled over into 2022 … if an employer allows it.
Can I Change How Much I Contribute Outside Open Enrollment?
This is a good question to ask your human resources department. Typically, you cannot change your contribution midyear. But you might be able to, if you have a “qualifying event” such as the birth of a new child.
Don’t hesitate to reach out to your benefits coordinator to make sure you’re allocating the amount of money that best suits the needs of your family.
How Procare Can Simplify Dependent Care Accounts
Procare Solutions offers financial management tools to child care centers, including the ability to do multi-family billing and send invoices. It also can take care of automatic billing and payments, making it easier for parents to receive the documentation needed to file claims to their dependent-care account administrators for reimbursement.
Does your kids’ daycare use Procare? Learn more about how Procare helps daycares track invoices and billing!