Au pairs

[Guest Nini]

Does anyone have any experience with reimbursement for au pairs services from a DCAP? We have done some research but have come up with some conflicting information.

Can upfront fees paid to the agency to obtain the services of the au pair be reimbursed from the DCAP? Since DCAP expenses are considered incurred when the services are provided, it seems that they could be reimbursed. In the specific situation, the services will be provided to a newborn, therefore, the employee does not currently participate in the DCAP. Can the agency fees be reimbursed if they were paid before an election in the DCAP was made?

Is the weekly stipend payable to the au pair reimbursable – does it depend on whether/not the au pair files an income tax return, or whether not an ITIN is obtained?

Any information/cites are appreciated - thanks.

[QDROphile]

Agency fees are eligible expenses if they are a necessary part of obtaining the services and linked to the services. Expenses are not eligible unless incurred during the period of coverage. The stipend is eligible to the extent that it is paid for eligible dependent care. A TIN or an acceptable alternative is required for exclusion from taxes. I don't recall if a TIN is part of required substantiation for reimbursement.

[LRDG]

Receipts for DCB must include providers Tax id number. If the provider is an individual, the tax id is the SS#, if it's a DC facility, the TIN. The tax id must be provided on the tax return of anyone claiming DC expense tax deduction, or substantiated on DC FSA receipts.

I have researched au pair regs for DC, but it's been some time ago. I'd suggest verifying with the agency their TIN, and verify if it's tax deductble. The agencies are usually well informed on IRS regs because the agency must ensure the au pair is in compliance with work permit requrements and collection of applicable taxes for foreign workers, etc., and because their fees are typically used for income tax return for DC expense deduction, or to substantiate DCB reimbursed from the FSA.

If the particular agency is not helpful or well informed, I be suspect if the expenses can be used for DC FSA or tax deduction, due to compliance concerns. I don't have a particular site to recommend for independent verification, but I'll post one if I can find one.

The dates of service must be performed within the dates the employee was a DCB participant. According to IRS if the employee enrolled in DC FSA on March 1 that would be the effective date for services. Service dates should not pre date the enrollment date, services must be performed within the period of time the individual was a DC FSA participant, usually determined by the date the enrollment form was signed. Verify with DC FSA administrator.