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Conference 7.286::digital

Title:	The Digital way of working

Moderator:	QUARK::LIONELON

Created:	Fri Feb 14 1986
Last Modified:	Fri Jun 06 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	5321
Total number of notes:	139771

280.0. "Dependant Care Assistance Benefit." by GOJIRA::PHILPOTT (Ian F. ('The Colonel') Philpott) Mon Mar 16 1987 15:06

    The subject of Day Care provisions has been debated intermittently and
    this is sort of related to it.
    
    I was watching morning TV (Channel 7 out of Boston - CBS I think) this
    morning and they started discussing a type of benefit...
    
    There is a benefit called Dependant Care Assistance Benefit (DCAB) which
    an employer can offer its employees that reduces both the employees
    income tax and the employers tax. It works like this:
    
    suppose you pay $5000 per annum to care for a dependant. You can make
    an arrangement with your employer to take a $5000 cut in [taxable] salary,
    and submit $5000 in invoices for the dependant care to your employer
    who pays them.
    
    Your taxable income has gone down by $5000 so you get full credit for
    the cost of providing dependant care.
    
    Your employers payroll has gone down by $5000 so they get the benefit
    of paying payroll and other taxes on the lower amount.
    
    Apparently this is an IRS approved [official] scheme. Also remember
    this is much wider than providing day care since ANY form of dependant
    care (day care, companion for youy infirm mother, etc etc etc) is
    elligible. 
    
    Now who gets to do the negotiating for this benefit?
               
    /. Ian .\

T.R	Title	User	Personal Name	Date	Lines
280.1	check before you negociate	SAUTER::SAUTER	John Sauter	`Tue Mar 17 1987 10:25`	6
	This sounds bogus to me. The IRS would certainly go after a $5000 benefit on the grounds that it was compensation, and therefore taxable as income. Before pushing for this, get information from an IRS office--don't assume that a Boston TV show has accurate tax information. John Sauter
280.2		VINO::KILGORE	Wild Bill	`Tue Mar 17 1987 10:49`	8
	Read the same thing in a magazine recently (Working Mother, I think). The only caveat there was that if you forecast $5000 in child care expenses, but only pay out $2500, you forfeit the rest - the advice was to estimate conservatively, and deduct expenses over the estimate on the tax forms. Sounded like a win-win situation. How do we get DEC to consider it?
280.3	This is real, not bogus	RSTS32::COFFLER	Jeff Coffler	`Tue Mar 17 1987 10:55`	31
	Nope, this definitely isn't bogus. My prior employer offered administering this stuff as a service and apparently does well in this business. The before-tax deductions aren't limited to DCAB. As I recall (it's been a while, though), there's also MRB (Medical Reimbursement Benefit), MI (Medical Insurance Benefit), LI (Life Insurance Benefit), and others that I'm sure I've forgotten. The way it works: You need to determine, up front, what your costs will be during the year (if there is money left over afterwards, you do get it back but must claim it via valid claims). Then there are payroll deductions to pay into these funds. You can then set up automatic monthly payments (good for DCAB, say) or you can submit claims (similar to JH Medical Insurance). MRB is nice because it can cover what MI doesn't (for example, it can cover the other 20% than JH won't). I don't have dependents, but DEC may indeed take a form of this right now: If you have dependents covered on Medical Insurance (and you must pay a fee), are those fees taxed? Also, I believe that the Digital SAVE program is a form of this (SAVE funds are before-tax, aren't they?) In fact, DEC distributed a memo a while ago that talked about these cafeteria plans: The federal government is looking into restricting these types of plans significantly and DEC suggested that you write your congress-person and state your feelings on the usefulness of the SAVE program (and related plans). In any case, this is real, not bogus. For how long? Who knows: Perhaps forever, perhaps one year. You can't tell how tax laws will change in the future. Who do you negotiate with to get these deductions? I'd probably think that personnel would be a good start.
280.4	Yup its real	SYSEFS::MCCABE	If Murphy's Law can go wrong ..	`Tue Mar 17 1987 20:46`	5
	I spoke to my business accountant. We have already planned on the deduction/credit to be funnelled through the family business accounts. It is a perfectly legitimate credit.