Dependent Care Activity Fees

[Guest patti.palmer@johnsjames.com]

Some employees are including an activity fee as part of their dependent care claims. It appears the fee is put toward supplies and other extra activities during the summer. Would this fee be reimbursable?

[papogi]

Activity fees that go toward things that are educational in nature technically should not be reimbursed, according to Pub 503. If the charges are small, incidental to charges for care, and cannot be separated out, then you can reimburse them. It sounds as if these are easy to separate out in your case. I would not reimburse them.

[Lisa Hand]

Per the IRS Informational letter on Kindergarten dated Sept. 7, 2000, "Section 1.44A-1©(6) provides that if a portion of an expense is for the care of a qualifying individual and a portion is for other purposes, a reasonable allocation must be made, and only the portion of the expense attributable to care is an employment-related expense. However, no allocation is required if the portion of the expense for the non-care purpose is minimal or insignificant. Accordingly, whether or not an expense qualifies for the dependent care credit depends on the nature and primary purpose of the services provided and is primarily a question of fact. In order for an expense to qualify in full for the dependent care credit, any portion of the expense for purposes other than care must be minimal or insignificant and inseparable from the portion of the expense for care."

So the provider has answered the question for you by allocating the expense to something other than care. If it is allocated to a purpose other than care, it is not inseparable and is not custodial care, therefore not reimburseable.