New Employee Benefit for Staff with Dependent Care Costs
By Estrelita Brown May 2010
Effective July 1, a Dependent Flexible Spending Account (FSA) provision will be added to CSI’s cafeteria plan. Under this plan, employees may opt to deduct a portion of their income from their paycheck for dependent care. These funds are not subject to federal income or social security taxes. This means you can use tax free dollars to pay for eligible dependent care expenses which you normally pay for with out-of pocket taxable dollars.
An eligible dependent is a child under age 13 that you can claim on Federal Tax Form 2441 “Credit for Child and Dependent Care Expenses.” Also included in the definition of an eligible dependent is someone who is physically or mentally unable to care for themselves. There are limits on the amounts that can be contributed to an FSA. Generally contributions cannot exceed $5,000 if you are married, filing a joint return or are head of a household or $2,500 if you are married filing separate returns. For reimbursements you will be required to submit a statement with the name, address and the taxpayer ID of the service provider and the amount of the expense as proof the expense has been incurred. Keep in mind that it may be more beneficial to you to take advantage of tax credit on your return. You cannot use both. Ask your tax adviser which will serve you better.
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