Dependent Care Reimbursement - Help needed on "qualified" da

[Guest MSMA]

The issue of "qualified" daycare has come up...

After referring to our Thompsoms manual - we are left feeling that this is a grey area. In order for an expense to be reimbursable, is the provider required to be a bona fide "daycare center"? Or, can the provider be a neighbor who sits for just the one child of the DCA participant?

As a second part to this - how are we to KNOW if someone is "qualified" and do we need to know how many children are cared for by the provider?

(The other DCA issues do not seem to be a problem. The participant only uses this neighbor to allow her to work. They both claim the appropriate taxes etc...)

Thanks in advance for the kindness of your reply.

[papogi]

The provider does not have to be an actual daycare center. If it is a center, the IRS has some rules for the center to abide by in order to be qualifed (care for more than 6 individuals, receive a fee for services, comply with state and local laws). A provider can be a paid neigbor, or any individual, as long as the individual is not the spouse of the taxpayer, an under age 19 child of the taxpayer, or any dependent of the taxpayer. If the provider is an individual, the rules relating to qualified daycare centers do not apply.

As long as the parent does not knowingly put a child into a non-qualified center and claim expenses, you have no real way to know for sure if the daycare center is qualified. You can ask them to sign something indicating that they adibe by the three rules above, thereby being qualified. The only way it should ever come up is in an audit, and I can't see that mislead customers (ones who can prove they had no reasonable way to determine the center's qualified status) would be held accountable.

[Guest MSMA]

Thanks for confirming our interpretation.