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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22648
Experience:  Taxes, Immigration, Labor Relations
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I am divorced and delegated as joint managing custody of our

Customer Question

I am divorced and delegated as joint managing custody of our children with my ex wife as primary custodian. As such she gets to declare the two children as dependents. In addition to child support, I pay $350 a month in childcare to a nanny. My company offers a dependent care flex spending account. Should I sign up for it?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

Yes - the money you pay to a nanny is considered qualified child care expenses and may be reimbursed from the dependent care flexible spending account.

Please let me know if you need more details.

 

Customer: replied 5 years ago.
Even though I cannot claim them as dependents on my tax returns?
Expert:  Lev replied 5 years ago.

Claiming a child as a dependent in your situation has nothing to do with being able to claim Child and Dependent Care Expenses -

The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents.

So if you are a noncustodial parent - even if you would be allowed to claim the child as a dependent - you cannot deduct dependent care expenses.

 

For flexible spending account - you must complete Part III of Form 2441 , Child and Dependent Care Expenses to claim the exclusion of the benefits from income even if you cannot claim the credit.

 

See more details here - http://www.treas.gov/press/releases/reports/section125.pdf

Please provide this information to your tax preparer for considerations.

 

Expert:  Wendy Reed replied 5 years ago.

DearCustomer

 

Unfortunately, the non-custodial parent is not allowed to take the dependent care credit nor set up an FSA plan for dependent care expenses. If you check the details of your FSA plan through your human resources department, you will find that this is so. I can link you to websites with instructions and rules for specific FSA plans if you are interested.

 

Here is a link to IRS "Tie-Breaker" policies used when more than one person claims the same child for certain tax benefits. Listed among these benefits is dependent care assistance under Sec. 129, which "incorporates by reference the definition of qualifying child or other qualifying individual under Sec 21". http://benefitslink.com/IRS/notice2006-86.pdf

Expert:  Lev replied 5 years ago.

Please disregard my previous responses - as I was incorrect - and please accept the answer provided by Wendy...

 

The child is qualified for both Child and Dependent Care credit and Dependent Care FSA - ONLY if you are a custodial parent regardless who claims the dependency exemption for that child.

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