I Don't Wanna Be an Inadvertent Tax Fraud!
October 28, 2010 1:25 PM Subscribe
Anec-data needed regarding dependent care FSAs and boneheaded people (ahem - me!) who unintentionally abuse them.
The Situation: my employeer offers a dependent care flexible spending account. Ever since my kid was born, I've contributed the maximum ($5K/yr.) to this account and used it to pay for said kid's daycare. It's easy, I save money, everybody wins.
HOWEVER, I'm dopey AND a creature of habit. I didn't know that FSA money can only be used for school tuition until pre-K... and my kid started kindergarten last month. For the past two months, I've been submitting claim forms and getting reimursed, just like always. I would have remained blissfully unaware had a friend not brought the situation to my attention.
Some more relevant info:
- The plan is administered by Big Honking Payroll Company That Starts With An "A".
- They've marked every one of my claims as "Eligible".
- The school bills I've faxed them don't say "tuition" or "kindergarten"; they say "pre-primary program".
- Our plan year for FSA stuff begins in April, ends in March. Kindergarten started in Septemper. So everything before then WAS legit.
- Whenever I've filed my taxes in the past, I didn't have to mention dependent care; it was listed as a separate line item on my W2 and that was that. Note: I am divorced and kiddo is listed as my ex's dependent, NOT mine.
My Question: WTF do I do?! I don't want to break the law. However, I also don't want to get slammed with big-ass IRS penalties, if possible.
- Have you (or someone you know) been in a similar situation? What did YOU do? What happened?
- What are the odds that I'll get caught?
- Can/should I change my FSA witholdings now, or would it be safer to fly below the radar until the next plan year, then adjust accordingly?
The Situation: my employeer offers a dependent care flexible spending account. Ever since my kid was born, I've contributed the maximum ($5K/yr.) to this account and used it to pay for said kid's daycare. It's easy, I save money, everybody wins.
HOWEVER, I'm dopey AND a creature of habit. I didn't know that FSA money can only be used for school tuition until pre-K... and my kid started kindergarten last month. For the past two months, I've been submitting claim forms and getting reimursed, just like always. I would have remained blissfully unaware had a friend not brought the situation to my attention.
Some more relevant info:
- The plan is administered by Big Honking Payroll Company That Starts With An "A".
- They've marked every one of my claims as "Eligible".
- The school bills I've faxed them don't say "tuition" or "kindergarten"; they say "pre-primary program".
- Our plan year for FSA stuff begins in April, ends in March. Kindergarten started in Septemper. So everything before then WAS legit.
- Whenever I've filed my taxes in the past, I didn't have to mention dependent care; it was listed as a separate line item on my W2 and that was that. Note: I am divorced and kiddo is listed as my ex's dependent, NOT mine.
My Question: WTF do I do?! I don't want to break the law. However, I also don't want to get slammed with big-ass IRS penalties, if possible.
- Have you (or someone you know) been in a similar situation? What did YOU do? What happened?
- What are the odds that I'll get caught?
- Can/should I change my FSA witholdings now, or would it be safer to fly below the radar until the next plan year, then adjust accordingly?
A DCFSA covers eligible expenses for the care of:
Dependent children under age 13
A person of any age you claim as a dependent on your Federal Income Tax return, and who is mentally or physically incapable of self-care. This would include an elder or other adult dependent.
I'm pretty sure you're ok.
posted by Siena at 1:50 PM on October 28, 2010
Dependent children under age 13
A person of any age you claim as a dependent on your Federal Income Tax return, and who is mentally or physically incapable of self-care. This would include an elder or other adult dependent.
I'm pretty sure you're ok.
posted by Siena at 1:50 PM on October 28, 2010
Can you clarify this:
I didn't know that FSA money can only be used for school tuition until pre-K... and my kid started kindergarten last month. For the past two months, I've been submitting claim forms and getting reimursed, just like always.
So, Kid now goes to Kindergarten - what are you claiming for? Private Kindergarten tuition? Before- and After-school care?
You are correct that private school tuition is not an eligible FSA expense, but if you're submitting for before- and after-school care that's legit. I've heard reports that it can also make a difference whether or not Kindergarten is required for children in your state (here in Maine, for example, kids are not required to be in school until they are 6) but you'd probably want to check with your HR department on that.
In general, you can't change your FSA withholdings without a "qualifying event" (just like your insurance).
posted by anastasiav at 1:50 PM on October 28, 2010
I didn't know that FSA money can only be used for school tuition until pre-K... and my kid started kindergarten last month. For the past two months, I've been submitting claim forms and getting reimursed, just like always.
So, Kid now goes to Kindergarten - what are you claiming for? Private Kindergarten tuition? Before- and After-school care?
You are correct that private school tuition is not an eligible FSA expense, but if you're submitting for before- and after-school care that's legit. I've heard reports that it can also make a difference whether or not Kindergarten is required for children in your state (here in Maine, for example, kids are not required to be in school until they are 6) but you'd probably want to check with your HR department on that.
In general, you can't change your FSA withholdings without a "qualifying event" (just like your insurance).
posted by anastasiav at 1:50 PM on October 28, 2010
FYI: This link (answers.com, take that as you will) seems to say that "Employees with children can use these accounts to cover day care and educational expenses up to and including private kindergarten. "
Bottom line is: what do your plan documents say? Your HR department or Big Honking Payroll Company should be able to provide you with a copy of the plan documents, and you won't need to tell them why you're asking.
posted by anastasiav at 1:55 PM on October 28, 2010
Bottom line is: what do your plan documents say? Your HR department or Big Honking Payroll Company should be able to provide you with a copy of the plan documents, and you won't need to tell them why you're asking.
posted by anastasiav at 1:55 PM on October 28, 2010
Mod note: From the OP:
To clarify: private kindergarten isn't covered by my plan; I checked today. Re: what I'm claiming for. Basically, what I did wrong was CONTINUE doing the exact same thing I've been doing for the past few years - submitting a claim every month for the full tuition amount for "pre-primary program" (which is how it appeared on the bill for both pre-k and kindergarten; it's a hippie school with heterogenous grouping and no formal "kindergarten" designation - but kid is five and doing kindergarten work). The issue is that I'm afraid the bulk of what I claim (the actual tuition part - I also claim before/after care, but it's a small emount) may have become ineligible last month. Thanks!posted by jessamyn (staff) at 2:23 PM on October 28, 2010
This thread is closed to new comments.
posted by Siena at 1:42 PM on October 28, 2010