Important reminders about Dependent Care Spending Accounts
There are a few areas of Stanford's tax-free Dependent Care Spending Accounts (DCSA) that prompt the most questions. Some of those areas are addressed below. More information can be found at the BeneSphere website ( http://www.benesphere.com ) or in your Stanford Health & Welfare Summary Plan Description.
Stanford requires each participant to document requests for dependent care reimbursement in the manner noted below. Because the IRS permits reimbursement only for actual services rendered during the calendar year, a canceled check is insufficient documentation -- it does not show when you received the services for which you paid. According to IRS guidelines, you must document the date of services, the amount paid and the provider of services.
These are the steps to ensure prompt reimbursement:
- Fill out the BeneSphere claim form
available from the Office of Total Compensation or the SLAC
Benefits Office. You may also print a copy of the form from the
(http://www.benesphere.com ) and have your daycare provider sign in the designated area; and
- On a separate sheet of paper, provide a receipt showing your provider's name, tax ID. No., the period of service and the amount for the service.
Eligible Day Care Expenses
Stanford employees frequently ask about daycare expenses that are eligible for tax-free reimbursement from a DCSA. Your DCSA is for qualified expenses that are necessary in order for you, or you and your spouse if you are married, to go to work.
Eligible dependents include any children under age 13 whom you claim as dependents for income tax purposes, or those dependents who live with you who may be physically or mentally incapable of caring for themselves.
Because the care must be necessary
for you to work, the law requires that eligible care must be
primarily custodial as opposed to educational. Generally, care for
children from newborns to age 6 is presumed to be primarily
custodial. Care for children from age 6 to age 13, however, is
harder to categorize because children this age are more likely to
be involved in an enrichment or educational experience after
school. So, for an older child, eligible after-school care can be
supervised play time, child care in your home, summer day camp or
after-school day care provided by a family member whom you do not
claim as a dependent for income tax. In contrast, math, reading,
computer tutorial programs, martial arts classes, competitive
after-school sports, or music lessons are examples of programs that
are not primarily custodial and are not reimbursable from your
DCSA. More detailed information about DCSA is available from
BeneSphere's website at http://www.benesphere.com, or from
Publication Nos. 502 and 503 from the IRS website
( http://www.irs.ustreas.gov ).
Dependent Children Losing Eligibility at Age 13
After your dependent child turns age 13, you may no longer receive tax-free reimbursement from your DCSA for this child's day care expenses. However, for employees who participate in a DCSA, a dependent child turning 13 (with subsequent loss of eligibility) constitutes a Change in Family Status. You then have 30 days from the child's birthday to reduce or discontinue your DCSA. You may call the Office of Total Compensation or SLAC Benefits Office for instructions on making a change to your DCSA contributions.
If you should fail to reduce or discontinue your contributions within 30 days of the child's 13th birthday, your contributions will continue to be directed to the DCSA through December 31 and you will forfeit all ineligible contributions.