Dependent Care FSA and Taxes

[soundbyte]

Hello all,
I have an Dependent Care FSA that runs until the end of March, due to my company's benefit cycle. Per my understanding, this means I have until then to submit my claim for my nanny expenses. However, given that there is a tax benefit, I assume I should claim as much as I can for the Calendar year, and then claim any additional expenses after January 1?
This may be a foolish question, but Is it simply my contributions to the FSA that matter for taxes, and not whether or I get reimbursed?/file a claim? This is my first year using a FSA and given that the benefit cycle doesn't match up with the tax year, it has me slightly confused.

Thanks

[MollyStaniferCFP]

soundbyte,

Is it just that you have until March to make all claims for the prior year? I would think 403(b) contributions and other employer benefit cycles would be very difficult to manage if it is not on a calendar year cycle; especially in filing your personal taxes.

The expenses eligible need to occur in 2016. You probably have the contributions coming out of your paycheck each pay cycle. Most employers give you a few months into the next year to make sure that last contribution in 2016 isn't forgotten and to gather the supporting documents to make the reimbursement claim. 

If you have a remaining balance in the account, it is forfeited back to your employer which will be reflected on your W2 (box 10).

 

[soundbyte]

The FSA plan appears as if it runs through March, but it could very well be I have until March to file a claim. I was limited in how much I can contribute each pay period (I started my job in August, was hoping to max out the FSA in 5 months...company wouldn't let me). Given that I want every penny I put into the FSA back, I guess it makes the most sense to file a claim in early January to ensure the final contribution is recouped. Does this sound right?

[paramount]

Usually the charges have to be by 1/1/2017 but you can file for reimbursement up to march 15 or april 15

[soundbyte]

So I finally got a hold of my FSA Info and verified it.

My Dependent care FSA has the following:

"Use from 9/1/16 (date of hire) to 5/31/17 (end of company benefit year). Claim by 8/29/17."

Given this, I am confused as to how this will work for taxes. Will I just claim the tax benefit for whatever portion I used this year (e.g - $1800)? Then, for the entire tax year of 2017, be able to claim the full $5000 maximum, even though it spans 2 benefit years?

 

[jfoxcpacfp]

soundbyte wrote:

So I finally got a hold of my FSA Info and verified it.

My Dependent care FSA has the following:

“Use from 9/1/16 (date of hire) to 5/31/17 (end of company benefit year). Claim by 8/29/17.”

Given this, I am confused as to how this will work for taxes. Will I just claim the tax benefit for whatever portion I used this year (e.g – $1800)? Then, for the entire tax year of 2017, be able to claim the full $5000 maximum, even though it spans 2 benefit years?

 

Click to expand...

Your tax benefit results from your contribution to the FSA. it will be reflected on your W2. The only impact of what you spend out of your FSA is if you do not submit the required minimum level of receipts and forfeit part of your contribution, which will then be reflected on your W2. You will probably be able to carry over $500 of unused expenses until the following year.

All you have to do is spend enough to use the contributions that have been withheld from your paycheck for the year, turn in your receipts on time, and enter the info from your W2 correctly on your income tax return.

[MollyStaniferCFP]

Interesting.

I agree with Johanna. Just remember, Dependent Care FSAs do not allow any carryover (like the $500 carryover allowed in healthcare FSAs).

[jfoxcpacfp]

MollyStaniferCFP wrote:

Interesting.

I agree with Johanna. Just remember, Dependent Care FSAs do not allow any carryover (like the $500 carryover allowed in healthcare FSAs).

Click to expand...

My bad, mixed them up; thanks for the correction.