Question about Dependent Care FSA Treatment

[JustYelpForHelp]

I currently have an employer. It is on a calendar plan year 1/1/24 - 12/31/24. 

I have contributed $3461 to my Dependent Care FSA this year (a $192 deduction per paycheck, going for the full $5,000). I am going to leave my job this week.

My spouse's job also offer a Dependent Care FSA but we don't use it (because of the $5,000 max contribution rule). Her plan is on a Fiscal Year Calendar 7/1/24 - 6/30/25.

Assuming we enroll in her plan effective 10/1/2024, here are my questions:

• How is the new DCFSA contribution amount treated on our taxes and how does the $5,000 annual rule factor in? If we elect to put in $4,000 on the new plan (spouse's employer)  is that spread pro rata on our taxes over 12 months from 7/1/24 to 6/30/25 or pro rata over 9 months from 10/1/24 to 6/30/25?
  • I saw another post that suggested that it depends on what the timing is of the expenses we use it for
  • Assuming there are 6 more paychecks in the year and then 13 in 2025 before the end of the plan year if we elect $4,000 that is $210 deduction per paycheck * 6 = $1,260 for the rest of calendar year 2024. $5,000 annual cap - ($3461 that I contributed at my prior employer) - $1,260 in new contributions is less than $5,000, so that seems ok. Right?
    • Then the remaining $4,000 - $1,260 = $2,740 is contributed from 1/1/25 to 6/30/25 over 13 paychecks?
• Will we be able to submit any expense incurred from 7/1/24 to 6/30/25 or only from 10/1/24 to 6/30/25?
• We have plenty of childcare expenses, so for the purposes of offering advice, please assume that if we "need" expenses that occur within a specific date, we have them to submit

[tagteam]

Please check back later. I will page a very knowledgeable member, @dmertz.

[Opus 17]

You can't be reimbursed more than $5000 in calendar year (tax year) 2024.

Each employee's W-2 will show the dependent care benefit in box 10, it will be the actual benefit for the calendar year, regardless of whether the company uses a different plan year. 

You will have to ask her employer how they will process her request.  If she requests $4000, it will be up to the company whether they deduct $500 per month through June 2025, or if they deduct $333 per month (which would be the annualized amount, but would end up only deducting $3000 over the remainder of the plan year).   If she asks for a full $500 per month, the company might refuse since that annualizes to more than $5000, or they might permit it, since she is enrolling for a partial year.  It's up to them.

Form 2441 accounts for amounts left in the plan for the following tax year.  For example, suppose she manages to have $500 per month deducted.  Your combined FSA benefit (W-2 box 10) $4962, so you are still under the $5000 limit.  If she is limited by her employer, it will be even lower, leaving you plenty of room under the $5000 cap.

In the event the total contributions/deductions were more than $5000, this will not cause a problem as long as you indicate the funds were carried forward to 2025 as permitted by the employer and not used for care in 2024. 

For your wife's plan, you can only request reimbursement for expenses incurred after her plan starts.