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Dependent Care Spending Accounts

Dependent Care Spending Accounts. Use it or lose it!. What is a Dependent Care Spending Account?. Per the IRS, guidelines are: Pre-tax savings account to pay for child-care or elder-care expenses for someone on your tax return (pre-federal, state, SS & Medicare taxes)

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Dependent Care Spending Accounts

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  1. Dependent Care Spending Accounts Use it or lose it! 1

  2. What is a Dependent Care Spending Account? Per the IRS, guidelines are: • Pre-tax savings account to pay for child-care or elder-care expenses for someone on your tax return (pre-federal, state, SS & Medicare taxes) • Care must be needed so that you can work • You must provide your provider’s Social Security number so be sure they are claiming the income • Use it or Lose it!

  3. How much may I contribute? CMH allows: • Between $100 and $5000 (even if one child) • Withholding is based on # of paychecks remaining in the year (24 max) • May be started, stopped or changed at hire, during Open Enrollment or after a Qualifying Event. (Note: a change in dependent care tuition is a qualifying event.)

  4. CMH subsidizes your DC Spending Account! CMH will help fund your DCSA. Your previous year’s income tax return determines the subsidy: Gross income reported on on your last tax returnCMH Subsidy Over $60,000 15% $30,000 to $60,000 20% Under $30,000 25%

  5. How does the subsidy work? For example, say you are signing up for a $5,000 (max) DCSA. The chart below shows how the subsidy works You contributeSubsidy %CMH contributes $4348 x 15% = $ 652 $4167 x 20% = $ 833 $4000 x 25% = $1000

  6. How does the Subsidy reach my DC Spending Account? • Say you signed up for a $3000 DCSA and are to receive a $500 subsidy. These steps occur: • HR instructs Payroll to give you a $500 taxable bonus • HR sets your DCSA deduction at $500 that week • The entire bonus will be deducted before • Federal and state tax withholding • Social Security & Medicare tax withholding • Finance submits your $500 to UMR • You may submit for $500 reimbursement from UMR • Your W-2 income will not reflect the bonus but will show $3000 was withheld for your DC Spending Account

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