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Dependent Care Advantage Account

Dependent Care Advantage Account
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What is the Dependent Care Advantage Account?

The Dependent Care Advantage Account (DCAA) is a negotiated employee benefit that helps state employee families pay for custodial child care, elder care, or disabled dependent care while they are at work.

Who is Eligible to Enroll?

Employees who work for Executive Branch state agencies, the State University of New York, the Legislature, and the Unified Court System are eligible to participate in the DCAA. Part-time and hourly employees are eligible as long as their biweekly paychecks can support their DCAA deductions. Employees of NYS Energy Research and Development Authority (NYSERDA), Environmental Facilities Corporation (EFC), New York Liquidation Bureau, and Roswell Park Cancer Institute are also eligible to participate.

New employees are immediately eligible for this benefit, but must enroll within 60 days, inclusive, of their hiring date. The plan year contribution amount will then be pro-rated over the remaining pay periods in the calendar year.

 


Who is Not Eligible to Enroll?

Employees paid on a fee basis are not eligible to participate in the DCAA.

What You Need to Know Before Enrolling

The maximum you may put into the account is $5,000 or $2,500 based on your tax filing status.

  • If you or your spouse earn less than $5,000 annually, you cannot put more money into the account than your income or your spouse’s income — whichever is less.
  • If you use the “Married Filing Jointly” tax filing status the IRS $5,000 maximum contribution rule is applied to households.
  • If both you and your spouse participate in a dependent care FSA the total household contribution is limited to $5,000.
  • If you file as “Head of Household”, the IRS maximum contribution is $5,000.
  • If you use the “Married Filing Separately” tax filing status, the IRS limits contributions to $2,500.
  • If you use the “Single” tax filing status, the IRS limit is $2,500.

Expenses must be for service provided from January 1 through December 31 of the plan year.

If the services are for child care, your child must be 12 years old or younger and must be your dependent as defined by federal tax rules. Services for a child or adult of any age are eligible if they are disabled and unable to care for themselves and spend at least eight hours of the day in your home.

The services may be provided either in your home or elsewhere, but not by someone whom you also claim as your dependent for income tax purposes. You may not pay your older child to care for your younger child or elderly parent.

The IRS requires you to provide the name, address, and taxpayer identification number (or social security number) of the person providing the care. You must provide this information when you submit a claim and when you file IRS Form 2441 Child and Dependent Care Expenses, with your income tax return.

 


Should I use the Federal Tax Credit or DCAA?

Deciding on whether to utilize the Federal Tax Credit or DCAA will depend on your specific tax situation. You may apply up to $3,000 of expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals to your taxes through the Dependent Care Tax Credit.

If you have two or more dependents and your household adjusted gross income is less than $43,000, you might find the federal tax credit to be more beneficial. However, if your household adjusted gross income exceeds $43,000, it is likely that the DCAA will provide greater tax savings.

Please use the online calculator to help you estimate whether to use tax credits, the DCAA, or a combination of both to maximize your savings.

Please consult your tax preparer, tax attorney, or accountant if you have any questions regarding your specific tax situation.

Employer Contribution

As a result of collective bargaining agreements between the State and the public employee unions, many employees are eligible for an employer contribution from New York State. You need to enroll in the DCAA to receive this contribution and if you are eligible, it is automatically deposited into your DCAA. You can enroll for just the employer contribution amount or any amount up to the IRS limit. The amount of the employer contribution should be included in your annual election.  

The DCAA employer contribution will be available in 2020 for unions that participate in the employer contribution program. The following employees are currently eligible for the employer contribution:

  • Employees of Executive Branch state agencies, Roswell Park Cancer Institute, or State University of New York who are designated M/C or represented by CSEA, PEF, UUP, NYSCOPBA, GSEU, or DC-37.
  • Employees of the Unified Court System, except those designated unrepresented (Negotiating Unit #88).
  • Employees of the Legislature, NYSERDA, or EFC.

 

IF YOUR SALARY IS: THE EMPLOYER CONTRIBUTION IS:
Under $30,000 $800
$30,001 - $40,000 $700
$40,001 - $50,000 $600
$50,001 - $60,000 $500
$60,001 - $70,000 $400
Over $70,000 $300
GSEU Employees only (regardless of salary) $600
 

The employer contribution may be available to state employees in other bargaining units for the 2020 plan year pending conclusion of negotiations and ratified contracts. Based on salary, the employer contribution may provide up to $800 for eligible employees who enroll in the DCAA. For employer contribution updates please visit this website or call 1-800-358-7202.

Whose Expenses are Eligible Under the Definition of Dependent?

The IRS definitions regarding dependents may affect your DCAA reimbursement. Use this information to determine if your expenses are eligible. You may use your DCAA to receive reimbursement for eligible dependent care expenses for qualifying individuals.

A qualifying individual includes a qualifying child, if he or she:

  • Is a U.S. citizen, national, or a resident of the U.S., Mexico, or Canada
  • Has a specified family-type relationship to you
  • Lives in your household for more than half of the taxable year (Special rule for children of divorced or separated parents. Even if you can’t claim your child as a dependent, he or she is treated as your qualifying person if you were the child’s custodial parent. According to the IRS, the custodial parent is the parent with whom the child lived for the greater number of nights in 2019. If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. For details and an exception for a parent who works at night, refer to IRS Pub. 501.)
  • Spends at least eight hours per day in your home
  • Has not provided more than one-half of his or her own support during the taxable year
  • Is 12 years old or younger

 

A qualifying individual includes your spouse, relative, or any other individual (as long as the relationship does not violate local law), if he or she:

  • Is a U.S. citizen, national, or resident of the U.S., Mexico, or Canada
  • Has a specified family-type relationship to you
  • Lives in your household for more than half of the taxable year
  • Spends at least eight hours per day in your home
  • Receives more than one-half of his or her support from you during the taxable year
  • Is physically or mentally incapable of self-care

If you are a tax dependent of another person, you cannot claim qualifying individuals for yourself. You cannot claim a qualifying individual if he or she files a joint tax return with his or her spouse. Only the custodial parent of divorced or legally-separated parents can be reimbursed using the DCAA.

Eligible and Ineligible Expenses

To use the DCAA, you must be paying for dependent care so that you and your spouse (if you are married) can work or go to school. If your spouse is not disabled, not at work, or not in school, it is assumed they are available to care for the dependent.

Some ELIGIBLE Expenses
Adult daycare Before/after school programs Family care provider Pre-school programs
Au pair 1 Boarding school 2 Home aide Housekeeper or cook (who also provides custodial care) Summer day camps including online and virtual camps
Babysitter Child care center Nursery school Sports day camp

 

Some INELIGIBLE Expenses
Activity fees Diaper service Piano, ballet, art lessons, etc. Supplies
Books Insurance fees Registration fees Transportation fees (unless provided by the caregiver)
College tuition Meals Residential nursing home T-shirts
Deposits 1 Medical expenses Sleepover camp Tuition (kindergarten and up)

1 Application, agency fees, and deposit expenses required to obtain child care for qualifying dependents are considered employment-related expenses; however, if the care is not provided (for any reason), these expenses are not eligible for reimbursement through the DCAA.

2 Proper documentation differentiating between expenses for the care of a qualifying dependent and expenses for other goods or services is required. For example, in the case of a dependent attending boarding school: the participant must allocate the expenses for care and the expenses for food, lodging, clothing, and education. Only the cost for care is reimbursable. Overnight camps are not considered employment-related expenses and are not reimbursable.

Changes in Status

You must enroll during the open enrollment period, unless you have a change in status event that occurs after the open enrollment deadline. New state employees who are unable to enroll by the November 8 open enrollment deadline because they have not been assigned a NYS EMPLID may enroll for the 2020 plan year by submitting a 2020 change in status change in status application within 60 days of their hire date.
Once enrolled in the DCAA, you may not change your mind. Your pre-tax deductions will continue throughout the calendar year. However, there are certain circumstances where a change may be permitted.  Here are some examples of eligible change in status events:

  • Marriage
  • Divorce or separation
  • Death (spouse/dependent)
  • Birth or adoption of a child
  • Beginning or end of employment (employee or spouse)
  • Dependent disability
  • Change from full-time to part-time employment or vice versa (employee or spouse)
  • Beginning of or return from leave of absence (employee or spouse)
  • Change in work schedule (employee or spouse)
  • Change in custody of dependent
  • Change in rate paid (only if the provider is not a relative)
  • Change in care provider
  • Dependent reaches age 13 (decrease or termination only)
  • Loss of another Dependent Care Assistance Program (DCAP) plan’s coverage (increase or enrollment only)

If you have a change in status, you must submit your application online or by phone within 60 days, inclusive, of the qualifying event, but as promptly as possible to prevent unwanted, non-refundable deductions. Your application to start, change, or terminate your account becomes effective once the date of the CIS event has elapsed or the date your application is received, whichever is later. Any change in your DCAA contributions must be consistent with the change in status. No additional documentation or verification of the eligible event is required. It is your responsibility to keep legal documentation of the changes in your personal records in case the IRS audits you.

If you are starting an account after the plan year has begun with an eligible change in status event, your expenses will be eligible for reimbursement from the date your application is received or the date of your change in status, whichever is later, through December 31.

Change in status applications will be accepted during the plan year until November 1, 2020 for change in status events that occur on or before November 1, 2020. Applications received after that date cannot be processed in time for the last pay period of the year.

Payroll Changes

Leave Without Pay

If you go on leave without  pay,  your DCAA deductions will automatically stop. When you return from your leave, you will need to file a change in status application either online or by calling the FSA administrator at 1-800-358-7202. You must submit your change in status application within 60 days of your return to work. Your account will be re-established for the remainder of the plan year. Change in status applications will be accepted during the plan year for change in status events that occur on or before November 1, 2020. Applications received after that date cannot be processed in time for the last DCAA deduction of the year.

Leave With Pay

Payroll deductions will continue for participants on sick leave, vacation, and sick leave at half-pay, provided there are sufficient funds in the paycheck. Deductions will not continue for employees receiving short- or long-term disability benefits through the Income Protection Plan (IPP).

Some of these situations may be considered eligible changes in status. If you have a question about your situation, contact the FSA administrator at 1-800-358-7202.

Terminations

If you leave the state payroll, your DCAA deductions will automatically stop. Your DCAA eligibility will continue from your initial eligibility date through December 31 of the plan year.

If you return to the state payroll and have not missed a deduction, your election not change. If you wish to make a change to your election you will need to submit a change in status application.

If you return to the state payroll and have missed a deduction, you may re-enroll by submitting a CIS application within 60 days of your return to the State payroll.

You can submit a change in status application either online or by calling the FSA administrator at 1-800-358-7202.

What to Do at Tax Time

Your DCAA contributions, including any employer contribution you have received, will be reflected in Box 10 of your W-2 Form. You will also need to file IRS Form 2441 when you file your Federal Income Tax return.

Please consult your tax preparer, tax attorney, or accountant if you have any questions regarding your filing requirements.

DCAA FAQs

Who determines whether a child or other dependent is disabled?

The IRS offers guidelines for you as the participant to consult in order to determine if your dependent is disabled.

 

Can I pay for my disabled child’s overnight expenses, since they are at the school during the day?

No. This account is only for daycare while you work—not for residential care, tuition for special educational schools, or medical care.

 

Do my child’s summer camp expenses qualify if occasional sleepovers are a part of any overall day program?

Summer day camps that offer occasional overnights are eligible. Sleepaway camps do not qualify, and your child must be 12 years old or younger.

 

My elderly mother requires care. I pay someone to take care of her in her own home while I work. Is this an eligible expense?

No. The IRS requires that the person needing care reside in your home at least eight hours a day.

 

How can payroll deductions to the DCAA be a benefit if I still have to pay for my dependent care expenses with my own money?

The money you contribute to your DCAA is not subject to state, federal, social security, and city (if applicable) taxes, so you end up paying less in taxes. This allows you to take home more of your paycheck and be reimbursed from your DCAA with pre-tax or whole dollars.

 

Can I pay my mother to care for my kids?

Yes, as long as your mother is not your dependent and will give you her social security number (SSN). You need her SSN so that you can report her as the caregiver when you file claims for reimbursement and when you file your income tax return. Your mother should report the payments as income.

 

Can I pay my spouse?

No. You can’t pay your spouse to care for your children. You also cannot pay your own child under age 19, or any other person you claim as a dependent.

 

Can I use the DCAA to pay a maid, cook, or housekeeper?

If the intent of the service is to provide your dependent with care while you work then those expenses are eligible.

 

What about kindergarten tuition?

Tuition costs for kindergarten and up are not eligible.

 
Can I participate in the DCAA if I use an au pair to care for my children?

Yes, the amounts paid to cover wages, taxes on those wages, expenses incurred for lodging, food the au pair consumes in your home, and agency fees are eligible for reimbursement.

 

What if my babysitter won’t give me their SSN?

In order to receive reimbursement, you must provide the FSA administrator with your caregiver’s SSN. Therefore, it is important that you discuss this program with your caregiver before electing to participate.

 

My 20-year-old child is disabled and lives in my home. We pay a neighbor to care for them while we work. Is this cost reimbursable?

Yes. If your disabled dependent is unable to care for themselves and your spouse also works, then the costs of caring for them in your home or at a special daycare facility are reimbursable. The same rules apply if your spouse is disabled.

 

I have a disabled friend who resides with me and for whom I contribute a sizable portion of financial support. Can I establish a DCAA for their care while I’m at work?

Yes, if the individual meets the IRS definition of a qualifying individual.

 

If I am able to enroll in the DCAA with an eligible change in status during the year, how far back may I calculate my expenses?

You should not back date your expenses. If you enroll during the plan year your expenses will be eligible from the date your change in status application is received, or the date of your change event, whichever is later.

 

What if my child turns age 13 during the middle of the plan year?

IRS regulations state that once a child turns 13, child care expenses are no longer eligible, unless the child is disabled. “Dependent reaches age 13” is a change in status event that will allow you to terminate or decrease the amount you contribute to your account.

 

My child was expelled from daycare and is now being cared for by a family member, free of charge. Can I terminate my DCAA?

Yes, “change in care provider” is an eligible change in status event.

 

What if I’m laid off, fired, or quit my job?

If you leave state service during a plan year, you retain your account through the end of that plan year. This means that although you cannot make any additional contributions to your account, you have until December 31 of the plan year to incur eligible expenses—and until March 31 of the following year to submit a claim.

 

What if my spouse is laid off, fired, or quits his or her job?

If your spouse is working or looking for work, then you are still eligible to participate, or you may use that event as a change in status to make a change to your account.

 

My spouse and I have separated but are not yet “legally” separated. Is that a “change in status?”

No. Other circumstances surrounding a separation may qualify, such as a change in employment schedule.

 
If I become legally separated, how does this affect participation in the plan?

A participant who is legally separated is not considered married for purposes of the DCAA and may be reimbursed up to $5,000 of eligible expenses—even if filing a separate tax return. Legal separation would constitute a change in status.

 

Can my spouse and I both use the $5,000 limit?

No, the $5,000 limit is a household limit.

 

My spouse is a full-time student. Can we participate in the DCAA?

Yes. However, the maximum you can contribute to the DCAA is determined by the earned income of you and your spouse. As a student, the IRS considers your spouse to be gainfully employed. Earned income is calculated as not less than $250 for one qualifying dependent and $500 for more than one qualifying dependent for each month the spouse is a student.

For example, if you have two children in need of care, and your spouse is a student nine months out of the year and earns no other income, the maximum you can put into the DCAA is $4,500.

 

How do I know if the Federal Tax Credit or the DCAA is better for me?

We encourage you to use the online calculator to help you choose. As the taxpayer, you must determine whether participation in the DCAA, claiming a federal and state tax credit or exclusion, or using a combination of the taxable and tax-free benefits is best for you. Consult your tax advisor or the IRS for additional information.

 

Can I take the Federal Tax Credit and be in the DCAA, too?

You cannot use the Federal Tax Credit and the DCAA for the same expenses. However, if you underestimate your DCAA contribution, the tax credit can be used for any remaining expenses up to the maximum allowed by the tax credit provisions.

The amount reimbursed through your DCAA reduces dollar-for-dollar the amount that can be used to calculate the Federal Tax Credit. Use the online tax calculator to find out how to maximize
your savings.

The current child and dependent tax credit limits are $3,000 of expenses covering one child and $6,000 for families with two or more children.

 

Will my dependent care deductions be reported to the IRS?

Yes. Your deductions will be reflected on your W-2 form in Box 10. You must file IRS Form 2441 with your tax return. Remember that IRS form 2441 requires you to provide a taxpayer identification number or SSN for each dependent care provider.

 

My spouse and I are divorced. My spouse claims the children as dependents for tax purposes, but we share equal custody. Am I able to enroll in the DCAA?

Yes, if you meet the IRS definition of a custodial parent. The custodial parent is the parent with whom the child lived for the greater number of nights in 2019. If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. For details and an exception for a parent who works at night, see IRS Pub. 501.

According to the IRS, the noncustodial parent can’t 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.

 

How is the amount of the employer contribution determined? What if I’m working at 50%?

It is based on your annualized state salary.

 

My spouse and I are both state employees and are represented by an eligible bargaining unit. Can we both enroll in the DCAA and get the employer contribution?

Yes. Apply for enrollment individually, and you will both receive the employer contribution based on your individual state salaries. Remember, your combined enrollments cannot exceed the $5,000 maximum calendar year household limit set by the IRS.

 

What is the minimum amount I can enroll for?

There is no minimum. However, you can enroll just for the amount of the employer contribution and your DCAA will be fully funded by New York State. You will have no biweekly DCAA deductions taken from your paycheck.