The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: jamesbond007 on December 08, 2017, 07:49:45 AM

Title: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: jamesbond007 on December 08, 2017, 07:49:45 AM
I signed up for Dependent Care FSA for the maximum amount $5000 for 2018 to offset the pre-school fees for my DD. But, my DW resigned her job yesterday for personal reasons and she does not intend to go back to work in 2018. She might but no guarantee. Did I just lose the $5k contribution? Is there a way I could un-elect from it now? Our enrollment window closed last month. Are we toast? Can I still claim reimbursements if DW stays a SAHM?
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: FLBiker on December 08, 2017, 08:45:07 AM
Interesting question.  I unfortunately don't have the answer but, in terms of this part: Can I still claim reimbursements if DW stays a SAHM? -- I think the answer is no.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: I'm a red panda on December 08, 2017, 08:47:15 AM
Isn't a job loss an eligible change in status? I'd suggest asking HR if you can un-elect.

Otherwise, you can look at what eligible expenses are and maybe enjoy some babysitters for a date night?
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: Calvawt on December 08, 2017, 09:16:56 AM
If she doesn't work in 2018, they can't take out the deductions from her paycheck.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: dandarc on December 08, 2017, 09:21:03 AM
If she doesn't work in 2018, they can't take out the deductions from her paycheck.
I read this as the money is coming from jamesbond007's checks and that they no longer need daycare due to mom quitting the job.  This is a question for HR.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: honeybbq on December 08, 2017, 10:05:08 AM
When we do our taxes we have to supply a tax ID of the corporation we paid to get the deduction. So I don't see how you will be able to do that.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: jamesbond007 on December 08, 2017, 10:14:01 AM
Well, my DD would still go to pre-school.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: bogart on December 08, 2017, 11:06:07 AM
My DH is RE and thus, we don't use this FSA for exactly the reason you reference -- we use paid child care, but we don't need it to be able to work.  As others have said, spousal job loss is something that counts as a life changing event and should make it possible to change your contribution outside of the open-enrollment window, just contact your HR office.  This shouldn't be a big deal (and sure, it's always a bummer to lose tax savings, but so it goes).
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: jamesbond007 on December 08, 2017, 11:41:24 AM
Ok. I just emailed our HR and I hope it gets sorted out.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: dcozad999 on December 08, 2017, 11:45:02 AM
Well, my DD would still go to pre-school.


Pre-school is a valid expense for Dependent Care FSA.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: seattlecyclone on December 08, 2017, 11:51:33 AM
Yes, preschool is a valid expense for dependent care FSAs, but both parents need to be working in order for that money to be tax-deductible. Looking through Form 2441 (https://www.irs.gov/pub/irs-pdf/f2441.pdf), it looks as though each parent must have at least $5,000 of earned income in order for a full $5,000 dependent care FSA to be fully deductible. If that doesn't happen, the amount of the disallowed benefit gets added back to your income and taxed accordingly.

I also remember reading that some versions of the pending tax reform would be eliminating FSAs for next year. Not sure what the status of that is, but it could make this question moot.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: jamesbond007 on December 08, 2017, 12:13:56 PM
Well, my DD would still go to pre-school.


Pre-school is a valid expense for Dependent Care FSA.

Yes. But from what I understand, both spouses must be working.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: dandarc on December 08, 2017, 01:58:39 PM
I did not know that before - looks like you're limited to the lowest individual earned income of the 2 spouses.  So, I'd either talk to HR about cancelling that election or have spouse find a way to get $5K in earned income in 2018.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: seattlecyclone on December 08, 2017, 03:53:52 PM
My understanding is that if you contribute to an FSA but your wife doesn't earn $5,000, you'll be taxed on that money the same as if you didn't have an FSA. As long as you actually plan to do preschool regardless, I don't think there's any real harm to keeping the FSA election intact. If you can cancel it you avoid the hassle of substantiating your expenses to the FSA company, but otherwise I think your taxes will be the same either way.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: jamesbond007 on December 08, 2017, 05:23:40 PM
My understanding is that if you contribute to an FSA but your wife doesn't earn $5,000, you'll be taxed on that money the same as if you didn't have an FSA. As long as you actually plan to do preschool regardless, I don't think there's any real harm to keeping the FSA election intact. If you can cancel it you avoid the hassle of substantiating your expenses to the FSA company, but otherwise I think your taxes will be the same either way.

That's great to know.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: Gone_Hiking on December 08, 2017, 08:53:01 PM
Seems to me you might be able to cancel the contribution.  Your wife's resignation is a change of job status and qualifying event to make changes.  Best of luck with HR.
Title: Re: Dependent Care FSA for 2018 - DW resigned her job - Are we down $5K?
Post by: jamesbond007 on December 13, 2017, 11:38:28 AM
Just wanted to give an update. HR has waived my dependent care FSA contribution. Problem averted. Thanks all.